Cardano may be showing the type of contrarian setup that investors usually watch closely near exhausted selloffs. According to supply chain and derivatives data provided by Santiment, ADA’s 365-day MVRV has dropped to -43%, while Binance Funding is showing the largest imbalance towards compact positions since June 2023, which the analyst firm says is a combination historically consistent with bottom conditions.

Is Cardano’s (ADA) bottom near?

Santiment Core Work is that Cardano holders who have been dynamic over the last year are now deeply underwater, which changes the risk-reward profile for up-to-date buyers. “Average wallets that have been active on the Cardano network over the past year are seeing a -43% return on their investments,” the company wrote on X. “Aside from the memes about the major altcoin price decline of -71% since September, this extremely negative MVRV is generally an indicator that $ADA is in the ‘opportunity’ or ‘buy’ zone.”

This argument is based on how Santiment interprets MVRV, or the difference between market value and realized value, over a 365-day period. In his view, when the average participant suffers significant unrealized losses, the risk of loss begins to decline because the weaker position has already been washed out. The chart provided by the company designates the MVRV area below zero as the “opportunity” zone and places the current ADA reading within it.

Santiment took this point further with a more explicit reading that contradicted it. “In a zero-sum game, when average returns are severely negative, it indicates an impending turnaround, with coins always averaging 0% on MVRV (average trading return) over any given time frame. So when other investors are feeling serious pain, key stakeholders and professional investors are intrigued by it due to the reduced risk of buying or adding to their positions.”

This doesn’t mean a rebound is guaranteed, but it explains the logic behind the decision. The signal is less about immediate dynamics and more about market structure: if up-to-date market entrants are already trapped at a loss, marginal selling pressure may begin to fade as value-focused buyers move in.

The second element of the setup comes from the perpetual futures market. Santiment said Cardano’s funding rate on Binance is currently showing the highest short-to-long ratio since June 2023, indicating that investors are strongly leaning towards further declines. In crowded positioning systems, this can be as critical as the scatter plot itself.

“Cardano Funding Rate on Binance Sees Highest Short (vs. Long) Ratio Since June 2023.” – wrote Santiment. “Traders clearly expect No. 12’s market cap to continue to decline. Historically, this is another lower signal as financing rates always tend to liquidate and send prices in the direction investors least expect.”

This last point is the real crux of the analysis. Santiment isn’t simply saying that ADA looks economical after its 71% decline since September. He argues that Cardano is currently at the intersection of two classic reversal ingredients: deeply negative holder returns and an overcrowded bearish derivatives trade.

At the time of publication, ADA was trading at $0.2666.

Featured image created with DALL.E, chart from TradingView.com