Cardano (ADA) grabbed the spotlight in the crypto arena after its futures trading volume surged to a 5-month high. The spike in the community interest comes at a pivotal time when ADA has just broken out of a bullish symmetrical triangle. Reporting about this increased interest of the community in ADA, crypto analyst Ali Martinez wrote on X, “Cardano $ADA futures volume hit $6.96 billion, the highest level in 5 months!”
What does it mean when the futures trading volume increases?
Futures trading is a prediction market where buyers and sellers agree to trade a cryptocurrency on a specific date in the future at a pre-agreed price. For instance, let’s say Bitcoin is trading at $60,000 today. You think it’ll rise to $70,000 in the next month, and then you enter a long futures contract to buy 1 BTC at $60,000 for delivery in 30 days. If Bitcoin goes to $70,000, you’ve locked in $60,000, so your profit is $10,000 (minus fees).
But if Bitcoin drops to $50,000, you’re still obligated to buy at $60,000, losing $10,000. This is how the futures market works.
When trading volume increases in a crypto futures market, it means that more contracts are being bought and sold within a given period. This usually signals higher activity, liquidity, and interest in that particular asset.
Does the increasing futures trading volume mean ADA is bullish?
No. Futures trading volume consists of long and short positions; hence, it’s not something you could use to predict whether the market is bullish or bearish. It just means that there is more trader engagement and liquidity. However, these spikes could have a huge impact on the price in either direction.
So, where is Cardano heading to?
According to Ali, ADA has broken out of the symmetrical triangle on the 30-minute chart. The break could have gone in either direction, as the symmetrical triangle is a neutral pattern that does not hint at a bullish or bearish break. Nonetheless, ADA broke out upwards, which is a good sign. However, the 30 minute chart could give you squint view of the prices. As such, to a get a bird eye view, we will need to check on higher time frames.
ADA has broken out from a bull flag on the 1-day chart, which gives a bigger picture and an overall idea of ADA’s price action. Since ADA has just broken out, there is more room for the price to appreciate. The Relative Strength Index indicator is currently at 62, which is below the overbought region. This gives ADA the room for growth.
So how far will ADA rise?
Based on the bullish flag pole breakout principle, a conventional breakout from the bull flag will have the token rise to the height of the flagpole. In this case, ADA has the potential to hit $1.8, if the bulls keep the pressure.
