In-depth Analysis: Why Did Cardano (ADA) Experience Extreme Liquidation? What Is the Future Trend?

“Black Christmas” has become a footnote in the memories of Cardano (ADA) holders for this holiday season. While most traders prepare for the year-end “Santa Claus Rally,” the ADA market experienced extreme volatility within just one hour. Long contracts were bloodied, with approximately $167,000 in long positions forcibly liquidated, while short liquidations amounted to only $243, resulting in an astonishing ratio of 66,530%. This sharp price fluctuation occurred during the typically quiet Christmas holiday period.

Event Recap: “Flash Crash” in Holiday Markets

On December 25th, while major global financial markets were closed for Christmas, the cryptocurrency market continued to pulse. However, low liquidity set the stage for extreme swings. That day, ADA’s price suddenly plummeted during calm trading, with a prominent hourly long shadow forming rapidly. This sudden drop caught many longs expecting a holiday rebound off guard. Market data shows this decline caused ADA to fall 2.09% over 24 hours, dropping to around $0.35, with weekly losses expanding to 3.67%.

Meanwhile, trading volume across the entire crypto market shrank noticeably. ADA’s trading volume decreased by about 22%, down to $380 million, consistent with historical patterns of reduced trading activity during major holidays.

Key Drivers: Why Did Extreme Liquidations Occur?

Multiple factors contributed to this rare liquidation event, primarily rooted in the structural fragility of the market during holidays. The shallow market depth was a primary cause. During the Christmas holiday, many institutional and retail traders exited the market, leading to severe lack of liquidity. In such an environment, even moderate sell orders could trigger disproportionate price swings, chain-reacting to liquidate large leveraged long positions. Subtle shifts in market sentiment also intensified selling pressure. Although there was widespread anticipation of a year-end “Santa Claus Rally,” ADA and mainstream cryptocurrencies showed signs of fatigue before Christmas, prompting investors to reassess risk appetite. When prices started to decline, this cautious sentiment quickly turned into a wave of selling.

Notably, the market had already accumulated significant long positions before this event. Some traders bet on a rebound after the holidays, using high leverage, making them particularly vulnerable to adverse price movements. A relatively small sell order was enough to trigger a chain of liquidations, creating a vicious cycle.

Market Environment: Capital Flows Out of Crypto

ADA’s extreme volatility is not an isolated incident but a reflection of the broader difficulties facing the current crypto market. Funds are flowing en masse from cryptocurrencies into traditional assets. In 2025, major global stock markets performed strongly, while the crypto market remained subdued. The market cap of stablecoins quietly rose to $300 billion, which could have fueled a bull run, but the reality was different—collective euphoria did not materialize. The appeal of cryptocurrencies has waned. This year, the US stock indices closed strongly, with the S&P 500 up nearly 18%, and the Nasdaq up 22%. Meanwhile, physical precious metals like gold and silver hit all-time highs.

This huge disparity in returns has led investors to “vote with their feet,” and the crypto market faces unprecedented liquidity challenges. According to The Block data, global spot trading volume on crypto exchanges in November fell to $1.59 trillion, the lowest since June.

Latest Data: ADA Price Status and Recent Volatility

As of December 31st, recent data shows ADA’s price has stabilized after sharp fluctuations. According to Gate data, ADA is currently trading within a range of $0.3485 to $0.3537.

Looking at recent trends, the ADA market remains fragile. Compared to around $0.37 earlier in December, ADA has significantly retreated. Investor losses are not optimistic; since early December, the total recorded losses among ADA investors have exceeded $900 million. Market data indicates that when ADA’s price depth drops to around $0.35, the average loss for all ADA investors is approximately 40%.

Technical and On-Chain Observations

From a technical analysis perspective, ADA is at a critical juncture. After this extreme liquidation event, ADA experienced a slight rebound from the $0.34 level, but the $0.37 zone has formed a significant resistance area. This zone coincides with the upper boundary of the descending channel and is reinforced by the 20-day exponential moving average (EMA). This technical resistance has repeatedly blocked upward momentum since the October plunge. On-chain data reveals a harsher reality: since the beginning of the month, large wallet addresses holding 1 to 10 million ADA (often called “whales”) have reduced their ADA holdings by about 130 million ADA, indicating significant selling pressure.

The derivatives market also shows cautious sentiment. ADA’s open interest (OI) remains low at around $657 million, reflecting most traders’ wait-and-see attitude following the recent sharp decline.

Outlook: Key Levels and Possible Scenarios

Looking ahead, market participants should focus on several key factors. Short-term liquidity changes will be the primary observation point. As the Christmas and New Year holidays end, traders are gradually returning to the market, and liquidity is expected to recover, potentially reducing the likelihood of similar extreme volatility events. However, market sentiment recovery will take time. Key price levels to watch are the $0.34 support zone, which remains crucial. If ADA can hold this level and break through the resistance at $0.37, it could open the way toward the $0.51 region.

Market should also closely monitor the overall crypto environment. With over $23 billion in options contracts approaching expiration, the market may face another wave of volatility. Additionally, macroeconomic policies, especially the Federal Reserve’s monetary policy outlook for 2026, will have a profound impact on all risk assets, including ADA. For traders seeking precise insights into ADA price movements, the Gate platform offers real-time ADA/USD price charts and conversion tools. These tools help investors quickly grasp the latest market conditions and make informed decisions amid volatility.

As of December 31st, Cardano’s trading price hovers around $0.3510, down nearly 88% from its all-time high of $3.09 four years ago. ADA network founder Charles Hoskinson has publicly denied rumors of large-scale selling, but the long shadow lines and liquidation data tell a different story. The market is undergoing a brutal filtering process. According to Santiment data, over 30% of Bitcoin is currently in loss, and the altcoin market is in an even more severe state. On the Gate platform, ADA/USDT perpetual contracts are closely linked to spot prices, and open interest remains low at around $657 million, indicating most traders are choosing to wait during this liquidity crisis.