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The price of Cardano bounced back strongly after breaking out of a bearish channel and falling by about 20% to $0.22. The rapid return of 17% towards $0.25 attracted new investors to buy the dip.
However, with sentiment remaining weak and key technical risks remaining unresolved, this recovery is now being severely tested. However, there are reasons to believe that this rebound in the price of ADA could be the beginning of something bigger.
Strong buying shows real demand for ADA
Cardano’s return is likely supported by strong demand in the spot market.
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After declining by about 20% on February 5, after breaking the descending channel, ADA recovered quickly It rose again towards $0.25. A long lower tail on the last candle indicates buying pressure near support.
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On the same day the market collapsed, spot market flows suddenly turned negative, reaching about $12.08 million compared to $2.1 million the day before.
This suggests that traders were actively withdrawing ADA from trading platforms and accumulating during the decline, rather than preparing to sell.
However, this consolidation has occurred while market sentiment around Cardano remains unusually weak, and this is the biggest risk currently.
Positive sentiment has declined sharply since mid-January, falling from about 57 to about 6, a 90% drop and a one-month low. Cardano’s strongest moves have often been fueled by growing optimism, as happened at the end of January, when a surge in local positive sentiment coincided with a 9% rebound in price.
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Note that the buying pressure and the corresponding rebound currently correspond with eroded sentiment, which means that confidence remains weak.
In any case, continue to monitor coin flows during the panic sale, as they remain a constructive signal and form the first pillar of Cardano’s recovery attempt.
Realignment of derivatives reduces leverage risk
It supports recovery the staff A second major factor is a sudden realignment of derivative positions.
Open interest fell significantly from its peak in September near $1.95 billion and from about $841 million in mid-January to about $494.7 million. This represents a drop of over 40% in less than a month.
Notice at the same time that funding rates have become slightly negative, which shows that long positions are no longer so aggressively dominant. This matters because many failed recovery attempts collapse when leverage is rebuilt too quickly.
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Cardano’s rebound was formed after a major leverage liquidation and thinning event. With open interest compressed and funding turning neutral or negative, the risk of forced selling from long and highly leveraged positions is currently low. This creates a more solid foundation for price stability compared to rebounds driven solely by derivatives speculation.
The accumulation of whales indicates contentment during a collapse
Major Cardano holders also showed signs of confidence during the sale. This is the third reason why the ADA price refund seems sound.
Wallets containing between 10 and 100 million Cardano coins have increased from about 13.41 billion to about 13.56 billion since the beginning of February, or about $40 million. Importantly, these addresses did not reduce their exposure during the sharp decline towards $0.22.
Its balances remained stable between February 4 and February 6, even as price volatility increased. This suggests that mid-sized whales saw the collapse as a buying opportunity rather than an exit signal.
Previous market cycles have often seen sustained recoveries preceded by periods of quiet accumulation like this during periods of fear. However, sentiment data shows that broader market confidence has yet to catch up with the whales.
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Despite the price rebound, positive sentiment has continued to decline, suggesting that the media narrative and retail traders’ interest remain cautious. This gap indicates that the current rally is driven by positions and capital flows, and not general optimism.
Key Cardano price levels will determine if the recovery will continue
All three support factors are now converging around a narrow price range. The $0.22 area remains the most important structural support level.
This level corresponds to the lowest price recently recorded during the collapse and the 0.5 Fibonacci retracement level. A sustained break below $0.22 will reopen the expected downtrend channel – discussed earlier – near $0.20, and invalidate the recovery attempt especially if sentiment remains low.
At current levels, Cardano needs to hold $0.24 and recover to $0.26 to maintain momentum.
A clear break above $0.26 could open the way towards $0.30, meaning an upside of around 20%. However, if the positive sentiment does not improve, the bullish wave may find it difficult to continue. If the price of Cardano falls below $0.22 while sentiment remains at monthly lows or negative news is released, the recovery will likely fade.
This could put the $0.20 level at risk, which is the initial channel break target and which remains part of the broader technical risks.
If the price of Cardano stabilizes and the market sentiment improves, Cardano could emerge as an early leader of the recovery, even against some of the biggest names in the cryptocurrency space.
