Cardano faced an 899% liquidation imbalance, as a 9:1 leverage wipeout hit traders, fueling $585,580 in 24-hour liquidations. Meanwhile, short liquidations came in at $65,090 according to CoinGlass data.

The broader crypto market largely traded in the red with $159 million in total liquidations as investors digested July's inflation print and looked ahead to further readings due today.

CPI for July increased by 0.1% month over month, matching expectations, with traders paring back bets on a Federal Reserve rate hike in September in response.

The July reading of the U.S. producer price index, which gauges what wholesalers pay for raw goods and materials, is set for release Thursday. Economists polled by Dow Jones expect an increase of 0.2% from the prior month.

Cardano sees profit-taking

At the time of writing, Cardano was down 1.08% in the last 24 hours to $0.183 and down 4.20% weekly as it marked six straight days of drops from August 7.

The drop coincided with a number of warning signals that were outlined by crypto analyst Ali in an August 11 tweet. Ali observed a fall in the number of whales holding between 1 million and 10 million ADA since August's start, suggesting that some large holders may be taking profits after the price increase at July's close.

The increased selling pressure triggered a death cross between Cardano's MVRV ratio and its 7-day simple moving average, indicating weakening momentum alongside the possibility of a deeper correction. This also coincided with the Tom DeMark Sequential flashing a sell signal on Cardano's daily chart.

Bear trap potential?

While Cardano faces the risk of a deeper correction, the potential of a bear trap is growing as momentum indicators remain in the positive zone.

A bear trap is a situation where the price appears to be falling, signaling that a bearish trend might be underway. This tricks traders into taking short positions, betting that the price will continue to fall. However, the price quickly reverses upward after the temporary drop, trapping short traders and forcing them to close their positions at a loss.

The daily RSI is above 50 at 52, which may suggest that it is not over for the bulls while bears are looking to exit.