Cardano rises 7%: a trap for retail traders or the start of a rally?
On July 21, the Cardano (ADA) token showed a confident rise of about 7%, continuing the upward trend that began at the start of the month. Since July 1, the gain has been around 9%. However, behind this seemingly positive movement lies a classic market trap set by large players.
My analysis of liquidity flows and market participant positioning points to a dangerous imbalance. While retail traders are massively opening long positions, expecting further growth, professional participants—"whales" and "smart money"—are quietly but steadily building shorts. A key indicator comparing the stakes of top traders with the rest of the market shows a stark contrast: among professionals, the ratio of long to short positions is 0.93 (a clear bias toward shorts), while across the entire market, including retail, this figure reaches 2.08. A gap of 1.15 points is an abnormally high value that often precedes either a sharp slowdown in growth or a trend reversal.
Futures confirm overheating
The derivatives market only reinforces my concerns. Open interest in ADA futures stands at about $1.11 billion across 94 perpetual markets. However, the key signal is the funding rate. It is at 0.01%, meaning that holders of long positions are forced to pay short sellers to maintain their positions. This is a clear sign that the market is overheated, and retail investors are willing to pay for the right to stay in the trade, just to avoid missing out on potential profits. Such a situation is extremely unstable.
Fundamental backdrop is unconvincing
Cardano's network metrics also do not inspire optimism. Although the Van Rossem hard fork, activated on July 18, is supposed to reduce the cost of developing smart contracts, the network's fundamental metrics remain weak. User activity has dropped to a 45-day low, and the total value locked (TVL) in Cardano's DeFi applications has shrunk to $69 million. This is 24% less than a month ago and nearly 90% below the two-year high. The price increase is clearly outpacing real demand.
My verdict: The current rise in ADA is not the start of a new bullish trend, but rather a trap set by professional players to liquidate an overheated retail long. If the "whales" are right, we will see a sharp pullback that will force many long positions to close. However, if retail can maintain the pressure and trigger a short squeeze, the price could soar. The outcome of this confrontation will determine Cardano's trajectory for the coming weeks.