Is the 26% rally of ADA a trap?

The price of Cardano (ADA) is continuing to perform actively, recording an increase of 2.87% in the last 24 hours and raising the total increase for the week to 26.86%.

However, this may not simply be a continuation of an upward trend. Although analysis shows that ADA has a clear path to reach new highs, the underlying market activity warns that this could be a trap.

Liquidity flow reaches a peak

In the past 24 hours, market liquidity has surged across both the derivatives and spot markets.

In the derivatives segment, the open contract (OI) — an index measuring the total value of futures contracts that have not been settled — has increased by more than 3% to $1.21 billion, equivalent to about $48 million added to the market, according to data from CoinGlass.

Source: CoinGlassThis is the third time this year that OI has surpassed the $1.2 billion mark — previously in March when ADA traded at $1.17 and for much of January when the price fluctuated around $1.

These liquid capital flows are often seen as bullish signals and align with previous rallies when OI surpasses the $1.2 billion threshold — often a precursor to the next strong price increases.

In addition, the spot market is also showing a clear bullish stance.

Source: CoinGlassData from Net Flow on the spot trading exchange - a tool that tracks net buying or selling pressure shows that over 14 million dollars ADA has been bought in the past week.

The buying pressure has contributed to maintaining the upward trend of ADA, which is currently trading at $0.754 at the time of writing.

On-chain data confirms a moderate inflow of funds

On-chain indicators also support the bullish trend, although on a smaller scale.

The total value locked (TVL) in protocols built on Cardano has increased slightly over the past 24 hours, indicating that investment activity is on the rise.

According to data from DeFiLlama, the TVL of Cardano has reached 333 million dollars, reflecting an increasing confidence in this network and long-term price growth prospects.

Source: DeFiLlamaIf TVL continues to increase, this could further reinforce the ongoing accumulation trend in both the spot and derivative markets, helping ADA maintain its bullish position.

However, analysis shows that this could be a trap — specifically a bull trap, especially when the price of ADA starts to show signs of rising.

Is ADA forming a bull trap ?

Chart data signals the potential formation of a bull trap based on liquidation cluster zones — a critical area that prices tend to gravitate towards.

Carefully observe the 24-hour liquidation heat map; the liquidity ahead of the current price level of ADA is still quite limited, as the liquidation clusters only appear up to the $0.78 region.

Source: CoinGlassConversely, a large amount of unfilled liquidity lies below, extending down to $0.68.

With ADA still trading in a bullish phase around $0.75, it is likely to approach the liquidity cluster at $0.78 before sharply reversing to trigger lower buy orders.

The price at the time of writing is only 0.03 dollars away from the cluster of 0.78 dollars, indicating that this rally could trigger a classic bull trap and liquidate long positions.

Dinh Dinh