Cardano’s native token, ADA, has experienced a significant rally in recent weeks, but analysts are now warning of a potential sharp downturn. The cryptocurrency saw its price surge by 15% over the past month, reaching a high of nearly $0.21 in early August, a level not seen since June. This upward momentum was initially fueled by a substantial influx of large investors, who acquired over 240 million ADA coins in less than a week.
Potential for a Significant Decline
Despite the recent gains, popular crypto analyst Ali Martinez has identified several factors that could signal a substantial short-term price correction for ADA. Martinez pointed to a decrease in the number of “whales” – addresses holding between 1 million and 10 million ADA. This metric has fallen from 2,370 to 2,340, suggesting that some large holders may be cashing out or reallocating their assets following the price surge.
Furthermore, Martinez highlighted the formation of a “death cross” between Cardano’s Moving Average Convergence Divergence (MACD) ratio and its 7-day simple moving average. This technical indicator is often interpreted as a sign of weakening momentum and an increased risk of a deeper correction. Adding to these concerns, the TD Sequential indicator on ADA’s daily chart has flashed a sell signal.
Martinez predicts that if these warning signs materialize, ADA could fall to the mid-range support level of $0.17. A further breakdown below this point could expose the lower boundary of the channel, potentially pushing the price down to around $0.144.
ETF Setback and Investor Sentiment
Adding to the bearish outlook, Grayscale, a prominent digital asset manager, recently withdrew its exchange-traded fund (ETF) filings for three altcoins, including Cardano. The launch of such a product had been eagerly anticipated by bulls, who believed it could significantly boost demand and drive up ADA’s price. The withdrawal means investors will have to wait longer for this potential catalyst.
Mixed Signals and Potential Buying Opportunities
However, not all indicators are pointing downwards. In recent days, ADA has seen higher exchange outflows than inflows, suggesting that investors are moving their holdings from centralized exchanges to self-custody. This trend can reduce immediate selling pressure on the market.
Additionally, Cardano’s Relative Strength Index (RSI) has dropped to 25, indicating that the asset is in oversold territory. Historically, such low RSI levels are often viewed as potential buying opportunities, as they suggest that the price may have fallen too far, too fast and could be due for a rebound.
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