Cardano Funding Rates drop to yearly low – Impact on ADA?

• Cardano’s Funding Rates have dropped to -49%, marking the lowest level in over a year. 
• This dip showed a high demand for short positions as the bearish sentiment rose. 

The cryptocurrency market recorded massive losses on the 3rd of February, with the total market capitalization dropping by 10% within 24 hours.

Cardano [ADA] was among the biggest losers after falling by 24% to trade at $0.67 at press time. 

The altcoin’s dip saw more than $31 million in ADA long positions being liquidated. This marked the second-highest level of long liquidations in one year. 

As these positions were forcefully closed, it caused a surge in selling activity that exerted further downward pressure on the price.

This long squeeze also caused a shift in Cardano’s derivative market, as seen in the drastic drop in funding rates. 

Funding Rates hit a yearly low 

Cardano’s Funding Rates have recorded a steep decline in the last 24 hours and hit the lowest level in one year.

At press time, this metric stood at -49%, indicating high demand for short positions and reduced bets that ADA will gain. 

A steep decline in Funding Rates shows that traders have become bearish on the altcoin as they anticipated further declines. However, such a steep drop could lead to a potential short squeeze if the trend reverses unexpectedly.

Can Cardano bounce from a two-month low? 

Cardano’s 24-hour dip has led to the price dropping to its lowest level in nearly three months. Sellers were behind this downturn, as seen in the $736M in selling volumes. 

However, sellers could be close to reaching exhaustion following a decline in the Relative Strength Index (RSI) to an oversold level of 25.

ADA has also dipped below the lower Bollinger band with high volumes, which also points toward oversold conditions. 

If traders begin to buy the current dip, it could trigger a trend reversal. Nevertheless, for a bullish trend to be confirmed, ADA needs to flip resistance at $0.84.

On the other hand, a fall below the support level of $0.31 could cause further dips. 

Read Cardano’s [ADA] Price Prediction 2025–2026

Reduced DeFi activity could fuel the downtrend 

Data from DeFiLlama showed a significant decline in activity on the Cardano network. At press time, the Total Value Locked (TVL) had dropped to $312M, marking the lowest level since early November. 

This declining activity could fuel Cardano’s bearish trend. However, traders need to watch out for an uptick in DeFi activity, as that could coincide with a rally.