Cardano (ADA) Price Retraces 16% Amid Redemption Controversy: Whales Accumulate as Technical Signals Point to Potential Rebound

Cardano's ADA cryptocurrency has experienced significant volatility in recent days, pulling back more than 16% from its mid-May highs of around $0.86 to approximately $0.73 on May 19, 2025. This sharp decline comes amid renewed scrutiny of the 2021 "redemption scandal" and growing technical pressure, though several bullish indicators suggest a potential rebound may be on the horizon.

Price Action and Technical Analysis

The recent ADA price retracement followed a rejection at the upper trendline of a descending channel on the four-hour chart. After breaking below the key $0.74 support level, ADA has found short-term support near $0.731, still maintaining a higher low relative to recent consolidation points. On the daily timeframe, the price remains positioned above its 20- and 50-period moving averages, suggesting that despite the pullback, short-term bulls have not ceded complete control.

The technical picture appears increasingly constructive as ADA has formed a falling wedge pattern on the three-day chart—a bullish reversal formation characterized by converging down-sloping trendlines. This pattern typically signals strength when broken to the upside and often precedes significant price appreciation.

"ADA retreated by 16% from its recent high of $0.86 after facing rejection at the upper range of the downtrend channel. However, the drop to $0.76 was still a higher low, and the price action was above short-term moving averages," notes market analysis from on-chain data.

Additionally, the current pullback appears to be forming what some analysts identify as part of a potential Elliott Wave structure, with the current movement potentially representing the second wave. If this pattern holds true, the third wave—typically the strongest and longest movement—could propel ADA significantly higher in the coming weeks.

2021 Redemption Controversy Resurfaces

A key factor weighing on ADA's price has been renewed discussion surrounding the so-called "redemption scandal" from 2021, involving approximately 318 million unclaimed ADA tokens from early ICO participants. Critics have alleged that these unredeemed tokens were repurposed for other uses—claims which Cardano's legal chief, Joel Telpner, has strongly contested.

"But when statements cross the line and become defamation, they should not and will not be ignored," Telpner warned, addressing accusations that have escalated to implying money laundering activities.

Cardano founder Charles Hoskinson has dismissed these allegations outright. The Cardano team maintains that all possible avenues were exhausted to reach out to participants who had not claimed their tokens. According to Daniel Tetsuyama, a Cardano figure involved in the process, the unredeemed funds were reallocated according to regulatory guidelines and not "stolen" as alleged.

To definitively address these concerns and provide clarity, Cardano's legal team has announced an independent third-party audit of the redemption process.

"There will be an audit conducted by independent third parties, whose findings will be made public. As a result, we know that this ongoing speculation on the ADA redemption process will, by necessity, give way to independently verified facts," Telpner explained.

Market Metrics Cool But Remain Constructive

The controversy coincided with cooling futures market engagement, as total Open Interest across ADA contracts dipped just below $400 million, indicating reduced appetite for leveraged exposure. Similarly, the spot Cumulative Volume Delta (CVD) declined over the weekend, reflecting waning buying pressure in the cash markets.

Despite these short-term headwinds, several key metrics and on-chain signals have emerged that paint a potentially bullish outlook for ADA:

Strong Technical Buy Signals & Whale Accumulation

TradingView's aggregated indicator panel recently flashed a rare "Strong Buy" rating for ADA, showing zero sell signals, nine neutral indicators, and thirteen buy signals across popular oscillators and moving averages. Such broad alignment across multiple technical indicators is unusual and underscores growing confidence among chart-based traders.

Adding credibility to this technical outlook, on-chain data reveals that whales have added over 80 million ADA to their holdings within just the last 48 hours. According to analyst Ali Martinez, citing data from Santiment, this substantial accumulation occurred even as prices declined, suggesting that large investors are capitalizing on the dip to increase their positions.

Whales have bought over 80 million #Cardano $ADA in the last 48 hours, according to data from @santimentfeed! pic.twitter.com/XkUrVUD4f5

— Ali (@ali_charts) May 17, 2025

"Whales have bought over 80 million ADA in just the last 48 hours, even as the Cardano price fell," noted Martinez. "This accumulation trend by whales suggests that smart money is taking advantage of lower prices to load up on ADA, potentially betting on a rebound once broader market sentiment improves."

Short-Squeeze Potential Adds Upside Pressure

A further bullish catalyst lies in the positioning of short sellers. Analysis indicates that over $25 million in ADA short positions would be liquidated if the price breaches approximately $0.794. The forced covering of these shorts at that level could amplify buying pressure, potentially driving ADA higher in a classic short-squeeze dynamic.

Cardano Ecosystem Continues to Grow

Beyond price action, the Cardano ecosystem continues to demonstrate robust development activity. According to recent data from Input Output:

• The total number of projects under development has increased to 1,999
• Delegated wallets remain steady at 1.33 million
• On-chain activity has increased to 109.37 million completed transactions
• Native assets have reached 10.79 million under 214,832 token policies
• Smart contract deployment remains strong with 133,417 Plutus scripts and 6,640 Aiken scripts

The development community has also remained active, with 224 GitHub commits indicating ongoing technical contributions across Cardano's codebase.

Upcoming Catalysts

Several potential catalysts could drive ADA higher in the coming weeks:

1. Independent Audit Results: The forthcoming audit findings regarding the redemption process could put longstanding controversies to rest, potentially removing uncertainty from the market.

2. NIGHT and DUSK Airdrops: Cardano is preparing for the upcoming NIGHT and DUSK token airdrops. NIGHT will serve as the token for Midnight, a zero-knowledge scaling network aimed at enhancing data protection for transactions and decentralized applications within the Cardano ecosystem.

3. Potential ETF Approvals: Industry watchers note the possibility that the Securities and Exchange Commission may approve Grayscale and Tuttle Capital's Cardano ETF applications later this year, which could significantly increase institutional demand for ADA.

Key Levels to Watch

As ADA navigates this volatile period, several price levels remain critical for traders and investors:

• Immediate resistance: $0.794 (short-squeeze liquidation zone)
• Secondary resistance: $0.85-$0.86 (May highs and upper channel range)
• Recovery target: $1.00 (psychological resistance)
• Primary support: $0.731 (recent low)
• Secondary support: The 50-period moving average is around $0.72 on the daily chart
• Tertiary support: $0.67 (lower support zone)

Conclusion

Cardano's recent 16% pullback reflects a combination of technical corrections and renewed scrutiny regarding the 2021 redemption process. While short-term metrics show reduced speculative interest, multiple positive signals—including a bullish falling wedge formation, substantial whale accumulation, and a rare "Strong Buy" technical rating—suggest that ADA may be positioning for a potential rebound.

The upcoming independent audit will be crucial in addressing lingering concerns about the redemption process, while technical patterns and whale activity indicate significant buying interest at current price levels. With a potential short squeeze trigger around $0.794 and continued ecosystem growth, Cardano appears to be weathering its current volatility with several fundamental and technical factors aligning for possible upside in the coming weeks.

As with all cryptocurrency investments, market participants should remain mindful of the inherent volatility and conduct thorough research before making investment decisions.