Analysis
Cardano investors have every reason to be cautious given ADA’s current range
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
- ADA lost over 50% of its value in the past three months
- ADA could continue to trade sideways within the $0.2530 – $0.2682
Cardano [ADA] has traded within the $0.2530-$0.2682 for the past 10 days. The sideways structure restricted investors from making meaningful gains as volume and volatility remained low.
Similarly, Bitcoin [BTC] traded sideways in the same period, with $17K being a significant resistance. BTC’s sideways structure has restricted the rest of the altcoin market from moving forward, ADA included.
At press time, ADA was trading at $0.2633 after a retest of its immediate resistance at $0.2682. Given the BTC’s restriction, ADA could drop lower to retest the lower boundary of its trading range.
Read Cardano’s [ADA] price prediction 2023-24
Will ADA’s price movement continue within this range?
ADA has been in a downtrend since August, forming a three-month falling wedge pattern. It dropped from about $0.56 to $0.26, shedding about 50% of its value within three months.
Although falling wedges are typical bullish trend reversal signals, ADA’s recent price movement was yet to record a convincing trend change.
Between late November and mid-December, ADA traded within the $0.3043 – $0.3227 range. However, ADA later broke below it, only to trade in another range ($0.2530 – $0.2682).
The Relative Strength Index (RSI) broke above the 30-mark, indicating that buying pressure had increased. However, the Money Flow Index (MFI) moved within a range but dipped by the time of publication, suggesting that distribution (selling pressure) increased slightly.
Therefore, RSI could retest the 30-mark or break below it if selling pressure intensified. That could force ADA to further trade within the range, hence dropping to retest the range’s lower boundary and support at $0.2530.
However, if RSI targets the midpoint at 50, ADA will break above $0.2682, invalidating the above bearish forecast. But such a bullish move will need ADA bulls to clear the obstacle at 50-period Exponential Moving Average (EMA) of $0.2835 to gain leverage.
Here are the whales behind ADA’s selling pressure
Source: Santiment
At press time, two major ADA suppliers’ categories showed a downtick – those who own 1-10M and 100K-1M coin holders. The downtick showed the distribution and subsequent selling pressure. These two suppliers collectively control about 25% of the supply volume.
Nonetheless, the category with 10M-100M ADA coins showed an uptick; thus, they opposed the selling pressure from the above two groups. Given that this supplier category control about 40% of the supply, could they inflict a price reversal?
How many ADAs can I get for $1?
Source: Santiment
ADA also recorded increased daily active addresses with improved sentiment as prices rose. This showed that buying pressure increased as investors became more confident about the asset.
Therefore, investors should monitor BTC and whales’ actions for any possible bullish trend reversal.
