Cardano [ADA] hints at a bull trap, here’s what it means for traders

• Cardano continued to consolidate below $1, a structure that historically precedes breakout rallies.
• Is this dormant liquidity coiling for a major move?

Cardano [ADA] continues its range-bound movement below $1, recently breaching key support at $0.85 and plunging 23%. The 1D chart now highlights a potential demand zone near $0.65.

Yet, a breakout beyond $1 faces strong resistance, making near-term price action critical. Reclaiming $0.85 could signal renewed bullish momentum, setting up a retest of the $0.95 ceiling. 

Cardano has gained 4.45% in the past 24 hours, fueled by a broader market recovery as the total crypto market cap approaches $3.20 trillion, up 1.82%, liquidating $871.64K in ADA shorts.

However, trading volume, which spiked above $1 billion during ADA’s dip to $0.65, has now dropped 24.16% to $668.4 million.

If volume fails to recover, the current price surge may be driven by a short squeeze rather than strong fundamental demand.

Is Cardano poised for a deeper pullback?

Cardano’s tight consolidation between $0.65 and $0.85 has fueled breakout speculation.

A bullish MACD crossover and an oversold RSI suggest growing upside momentum, further supported by the broader market recovery.

However, smart money inflows, which peaked in mid-January alongside ADA’s rally to $1.15, have since declined, closely tracking its 43% pullback.

In the derivatives market, Open Interest has risen by 2.16%, indicating traders are positioning for ADA’s 4% intraday surge.

However, with weak underlying fundamentals, this price action could be liquidity-driven rather than a trend reversal. Growing speculative exposure with low spot buying interest increases the likelihood of a long squeeze.

Over $100 million in leveraged positions are at risk of liquidation, indicating that Cardano’s current levels may not present a strong “dip-buying” opportunity.

A pullback to the $0.65 support remains in play. Failure to hold this level could trigger further downside, potentially extending the correction. Watch closely!