Cardano (ADA) has recently seen a price rally, but the sustainability of this upward momentum is in question. On-chain data and price charts reveal a complex picture, suggesting that while ADA could potentially rally to $0.47, the current rally might lack the necessary support to sustain such a move.
Current Rally Shows Weak Support
In the past week, Cardano’s price has shown impressive gains. However, a closer look at the data suggests these gains might be short-lived. The key metric highlighting this issue is the Daily Active Address (DAA) divergence. This metric tracks the correlation between an asset’s price movements and changes in its daily active addresses. Since September 3, Cardano’s DAA has consistently returned negative values. This divergence signals that despite the price increase, there’s insufficient user activity to support the rally. Essentially, the rising price is not backed by an increase in new or active users, pointing to a weak foundation for the recent gains.
Further complicating the picture is the decline in whale activity. Data indicates that large investors holding between 10,000,000 and 100,000,000 ADA have been trimming their holdings since September 5. This reduction in whale activity is typically a bearish signal, suggesting that large investors are cashing out, which could trigger a sell-off among retail traders eager to secure their profits.
Technical Indicators Point to Potential Decline
Cardano’s one-day chart reveals a bearish trend line that has been in place since July. This descending trend line indicates strong resistance and significant selling pressure, which has hindered ADA from breaking above key price levels. Despite the recent rally pushing ADA closer to this resistance line, the buying pressure has been insufficient to breach it.
The Chaikin Money Flow (CMF), which measures market liquidity, also supports the bearish outlook. Cardano’s CMF is currently negative at -0.01, suggesting a net outflow of capital from the market. This negative CMF combined with the rising price forms a bearish divergence, indicating that the rally is lacking strong buying support and may be due for a correction.
Fibonacci Retracement Points to $0.27
Looking ahead, the Fibonacci retracement indicator provides insight into potential price movements. If the current buying pressure continues to weaken, ADA’s price could retrace to the August 5 low of $0.27. This level represents a significant support point that could come into play if the market sentiment shifts towards a more bearish outlook.
Also Read: Cardano (ADA) Surges 4.44% This Week – Key Support Holds As Bullish Signals Emerge
However, it’s not all doom and gloom. If market sentiment turns more bullish and buying pressure increases, ADA could potentially climb towards $0.47. This scenario would require a significant shift in market dynamics and stronger support from both user activity and investor sentiment.
In summary, while Cardano’s recent rally has been notable, the underlying metrics and technical indicators suggest that the price movement may not be sustainable in the long run without additional support. Investors should brace for potential volatility and closely monitor market trends to navigate the uncertainties surrounding ADA’s price trajectory.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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