• ADA holding $0.22 with $12 million outflows signals dip-buying strength, not panic selling.
• Open interest down 41% since January reduces liquidation risk but limits fast upside.
• $40 million whale accumulation supports recovery, but weak sentiment keeps $0.20 downside risk.

Cardano price rebounded sharply after breaking down from a falling channel and sliding nearly 20% to $0.22. The quick 17% recovery toward $0.25 attracted fresh dip buyers.

However, with sentiment still weak and key technical risks unresolved, the rebound is now being closely tested. Yet, there are reasons to believe that this ADA price bounce could be the start of something bigger.

Strong Buying Shows Real Demand For ADA

Cardano’s rebound was possibly backed by strong spot demand.

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After falling nearly 20% on February 5, after breaking the falling channel, ADA quickly rebounded, climbing back toward $0.25. The long lower wick seen on the last candle suggests buying pressure near the support.

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On the same day when the market crashed, spot netflows flipped sharply negative, reaching around $12.08 million, compared with $2.1 million the previous day.

This shows that traders were actively withdrawing ADA from exchanges and accumulating during the crash, rather than preparing to sell.

However, this accumulation is occurring while market sentiment around Cardano remains unusually weak, and that’s the biggest risk at the moment.

Positive sentiment has fallen sharply since mid-January, dropping from around 57 to near 6, a 90% dip and a monthly low. Cardano’s strongest moves were often supported by rising optimism, as seen towards the end of January, when a local positive sentiment high coincided with a 9% price bounce.

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This time, buying pressure and the corresponding bounce are aligning with eroding sentiment, meaning confidence is still weak.

Even so, sustained exchange outflows during a panic sell-off remain a constructive signal and form the first pillar of Cardano’s recovery attempt.

Derivatives Reset Has Reduced Leverage-Driven Risk

The second major factor supporting Cardano’s rebound is the sharp reset in derivatives positioning.

Open interest has fallen significantly from its September peak near $1.95 billion and from around $841 million in mid-January to roughly $494.7 million. This represents a decline of more than 40% in less than a month.

At the same time, funding rates have turned slightly negative, showing that long positions are no longer aggressively dominant. This matters because many failed rebounds collapse when leverage rebuilds too quickly.

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In Cardano’s case, the rebound is forming after a large liquidation and deleveraging event. With open interest compressed and funding neutral to negative, the risk of forced selling from overleveraged longs is currently low. This creates a healthier foundation for price stabilization compared with rebounds driven purely by derivatives speculation.

Whale Accumulation Signals Conviction During the Crash

Large holders have also shown signs of confidence during the sell-off. The third reason why this ADA price bounce looks healthy.

Wallets holding between 10 million and 100 million ADA increased their combined holdings from around 13.41 billion to approximately 13.56 billion since early February, almost $40 million. More importantly, these addresses did not reduce exposure during the sharp drop toward $0.22.

Their balances remained stable between February 4 and February 6, even as price volatility spiked. This suggests that mid-sized whales viewed the crash as a buying opportunity rather than a signal to exit.

In previous market cycles, sustained recoveries were often preceded by this type of quiet accumulation during periods of fear. Still, sentiment data shows that broader market confidence has not yet followed whales higher.

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While price rebounded, positive sentiment continued to decline, indicating that retail and media narratives remain cautious. This divergence means the rally is being led by positioning and capital flows, not yet by widespread optimism.

Key Cardano Price Levels Will Decide Whether the Recovery Holds

All three supporting factors now converge around a narrow price range. The $0.22 zone remains the most important structural support.

This level aligns with the recent crash low and the 0.5 Fibonacci retracement. A sustained break below $0.22 would reopen the projected falling channel target (discussed earlier) near $0.20 and invalidate the recovery attempt, especially if sentiment remains depressed.

Above current levels, ADA must hold $0.24 and reclaim $0.26 to maintain momentum.

A clean breakout above $0.26 could open the path toward $0.30, implying an upside of roughly 20%. However, without a recovery in positive sentiment, upside extensions may struggle to sustain themselves. If the ADA price falls below $0.22 while sentiment remains near monthly lows or negative news emerges, the rebound is likely to fade.

That could expose $0.20, the initial channel-breakdown target, which still looms as part of the broader technical risk.

If the Cardano price holds and sentiment improves, Cardano could emerge as an early recovery leader, even against some of the bigger names in the crypto space.

Disclaimer