Cardano short squeeze risk is rising as ADA drops to its lowest price since December 2020. On June 24, ADA traded at $0.143, down 3.8% today.
According to CoinMarketCap data, trading volumes surged 32.4% to $499 million.
Why Cardano short squeeze risk is rising now
A previous Cardano price analysis identified a demand zone near $0.16. However, that level has failed to hold. Consequently, ADA is now at its lowest level since 2020. Nevertheless, short sellers remain unconvinced that the downtrend is over.
The funding rate heatmap on Coinglass shows the funding at -9.04%. This makes Cardano one of the assets with the highest number of short positions. However, this is not the first time that ADA’s funding rate has fallen to such an extreme negative level. For example, it occurred again on June 22, when the rate dropped to -20%.
The extreme negative rate means that the shorts side is getting overcrowded. Therefore, short-sellers are forced to pay more to keep their positions open. Additionally, open interest has increased by 5.47% to $374 million despite the price dropping by nearly 4%. This also supports that short bets are increasing.
Nevertheless, these short positions might close if the price of Cardano finds support at the six-year low of $0.145. Short sellers close their positions by buying. Therefore, if the price does not drop as they expect it to, they will buy, and this will push Cardano price higher.
ADA tests support in falling wedge pattern
The price of Cardano is trading within a falling wedge pattern on the four-hour chart. Specifically, it is now testing the support at the lower boundary at $0.148.
Dropping below this support at $0.148 will invalidate the bullish outlook that this wedge pattern usually portrays. Conversely, if Cardano can make three straight closes above $0.148 and then overcome the next obstacle of $0.15, the price might rise by 12%. This 12% rise equals the height of the falling wedge pattern.
The RSI reading of 23 suggests that the long-term Cardano price outlook is still bearish because sellers remain in control. However, this outlook will shift if ADA can overcome the obstacle at the 50-day EMA level of $0.16.
SecondFi loses $2.4 million in Cardano wallet exploit
SecondFi, the Cardano wallet formerly known as Yoroi, says it has patched a major exploit that drained roughly 16 million ADA (approximately $2.4 million) from 374 user wallets across three separate attacks.
The root cause was a flaw in SecondFi’s proprietary wallet generation software. Specifically, the vulnerability sits at the address level, meaning simply moving a seed phrase to another wallet offers no protection. “The security risk occurs when an affected user signs a transaction,” the team said on X.
Before attackers could reach a further 129 million ADA, SecondFi triggered emergency rescue measures. Consequently, the team routed the funds to an independent third-party custodian. An external accounting firm will verify those holdings, and affected users can submit claims to SecondFi.
Blockchain security firm SlowMist estimates total losses could exceed $20 million when accounting for the full range of compromised wallets and tokens. However, this figure remains unconfirmed pending an independent audit.
Cardano founder Charles Hoskinson acknowledged the incident but noted the dollar amount was modest relative to other crypto hacks. Nevertheless, he stressed that offered little consolation to those affected. “It hurts them whenever they lose anything,” he said. “This is the unfortunate reality of crypto.”
Cardano active addresses surge after exploit
The SecondFi exploit has increased the number of Cardano active addresses. For example, token Terminal data shows active addresses increased by 120% from 12,953 on June 22 to 28,545 on June 23.
The rise likely stems from sellers who panicked after the $20 million hack. The 4% drop seen on June 24 shows that demand remains weak.
