Holders of Cardano (ADA) can find some reason for cautious optimism, as the price of the altcoin has risen by 3% in the last week, hitting $0.34. Nevertheless, the prevailing sentiment around the coin tends to be bearish.
Analysis of on-chain data and price trends indicates that ADA might surge to $0.47 if the current upward trend persists. The crucial question lies in whether there is sufficient demand to sustain this momentum.
Cardano’s Price Rally Lacks Necessary Support
Despite Cardano’s price rally over the past week, the increase seems precarious. This is illustrated by its negative price Daily Active Address (DAA) divergence, a metric that monitors an asset’s price shifts in relation to variations in its daily active addresses. Since September 3, this metric has consistently shown negative readings, pointing to weak backing for the recent price increases.
When the price of an asset ascends in the face of negative DAA divergence, it signifies that the rally lacks robust support from heightened user engagement, indicating fragility and lack of sustainability.
Additionally, the decline in whale activity regarding Cardano further bolsters this perspective. Data on supply distribution indicates that substantial investors holding between 10,000,000 and 100,000,000 ADA have been gradually decreasing their positions since September 5.
Such a reduction in whale holdings usually sends a bearish signal, potentially prompting retail investors to sell off and lock in profits. If this trend persists, Cardano risks forfeiting its recent gains amid growing selling pressure.
Read more: How To Buy Cardano (ADA) and Everything You Need To Know
ADA Price Outlook: Prepare For a Drop to $0.27
Examination of Cardano’s one-day chart highlights that the altcoin has been consistently trading below a descending trend line since July. This bearish trend line is formed when an asset encounters significant selling pressure, establishing strong resistance as it strives to surpass particular price levels.
Even though the recent increase has brought ADA closer to this resistance line, current buying strength seems insufficient to break through. This is further supported by the declining Chaikin Money Flow (CMF), which gauges liquidity flow within the market. Presently, Cardano’s CMF stands at a negative -0.01, indicating capital is exiting the market.
Read more: 6 Best Cardano (ADA) Wallets You Should Consider in September 2024
The combination of an ascending price alongside a declining CMF creates a bearish divergence, suggesting that the price increase lacks solid buying support and may soon experience a correction.
According to the Fibonacci retracement tool, ADA’s price could retract to the August 5 low of $0.27 if buying pressure continues to diminish. However, should market sentiment turn more bullish, there is potential for ADA’s price to rise towards $0.47.
Disclaimer
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