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Cardano saw a sharp 26% surge following the Federal Reserve’s announcement of interest rate cuts two weeks ago, boosting optimism in the crypto market.
Analysts and investors are questioning the sustainability of the recent rise. Despite the initial rally, Cardano price failed to close above a key resistance level, signaling potential weakness in the uptrend.
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Santiment on-chain data reveals declining demand for ADA, reinforcing investor caution. Decreased network activity and buying pressure raise doubts about the sustainability of the current rally.
As the market awaits further developments, investors are closely watching for signs of a reversal or continuation of the uptrend, knowing that ADA’s next move could set the tone for its performance in the weeks to come .
Cardano Indicator Shows Concerning Data
Cardano faces significant risk of a 30% drop to its yearly low of around $0.27 as on-chain data from Santiment reveals increasing selling pressure and diminishing demand.
The warning signs for ADA price have become clearer, with its Daily Active Address Divergence (DAA) showing a negative reading of -43.3% at the time of writing. This metric, which tracks the correlation between an asset’s price movements and changes in its daily active addresses, has remained negative since September 7, indicating a worrying trend for Cardano.
DAA’s negative divergence suggests that much of ADA’s rally this month, following Federal Reserve interest rate cuts, was fueled more by general market sentiment than by specific demand for the ADA itself. This lack of biological demand increases the likelihood of a sharp correction in the near term.
Without sustained buying pressure, Cardano’s price could fall sharply as traders begin to take profits, pushing prices down further.
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If ADA fails to break out above its current resistance level of around $0.41, analysts expect a deeper correction, potentially taking the price back to the yearly low of $0.27. With demand weakening and selling pressure increasing, Cardano’s near-term outlook appears uncertain and traders are bracing for further downside risks.
ADA Price Action: Testing a Crucial Supply Level
ADA is trading at $0.38, following a 10% decline from its daily 200 exponential moving average (EMA) at $0.41. This level has become a crucial resistance area, as the price has formed a new local high around this area.
ADA needs to reclaim the $0.41 level and surpass the next key resistance at $0.45 to confirm an uptrend for the coming weeks. Successfully breaching these levels would signal renewed strength, putting the bulls in control and potentially leading to higher prices.
However, if ADA fails to surpass these critical levels, the altcoin could face further downward pressure. Failing to reclaim $0.41 and surpassing $0.45 would likely result in increased sales, triggering a potential 30% decline. In such a scenario, ADA would risk revisiting its yearly low of around $0.27.
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Given the current market uncertainty and declining demand, traders are closely monitoring ADA’s price movements as the next few days could be crucial in determining whether a bullish breakout or deeper correction is looming at the horizon.
Featured image of Dall-E, chart by TradingView
