During a bullish streak lasting 24 hours, the majority of alternative cryptocurrencies experienced double-digit increases. Cardano [ADA] distinguished itself by soaring 10%, edging closer to the coveted $1 threshold following a period of stagnant consolidation.
Against this backdrop, an intriguing question emerges: Is this the breakthrough moment for ADA, representing an opportune time to consider buying the “dip”? Or is it merely another speculative surge destined to peter out?
Reduction in Short Positions coincides with Fresh Momentum in the New Year
An intriguing narrative unfolds through Cardano’s price movements. While Bitcoin [BTC] surged to an unprecedented high of $108K in mid-December, Cardano’s trajectory took a different path.
Starting from early December, ADA embarked on a downward trend indicative of bearish sentiment. This divergence hinted at a potential detachment from the broader market rally.
Following a peak at $1.25, profit-taking appeared to be triggered, particularly with the RSI signaling an overbought status.
Of particular significance, the ADA/BTC pairing registered downward trends, suggesting that holders of Bitcoin were not rushing to embrace Cardano, causing a downturn in ADA’s performance.
However, with the conclusion of Q4 and Bitcoin maintaining a stable range, a surge in the new year has emerged as investors venture into high-cap alternatives.
Short-sellers found themselves caught off guard, resulting in a massive $107 million liquidation of short positions. As the market turns bullish, a ripple effect is triggered, benefiting various assets including Cardano, which witnessed a squeeze worth $1.78 million.
Yet, caution is recommended. Despite the green trend, substantial challenges lay ahead. For Cardano, surmounting the $1 mark in the ensuing days is crucial.
This milestone signifies more than a mere price point; it acts as a catalyst for FOMO (Fear of Missing Out) to attract fresh investments and engage potential investors looking to diversify their portfolios.
Securing $1 Support Represents the Next Significant Hurdle for Cardano
Undoubtedly, breaching the $1 barrier is a noteworthy accomplishment; however, maintaining this position proves to be an additional challenge, one that Cardano grappled with during Q4. Multiple failed attempts in December epitomized the struggle resulting from inadequate retail investments.
In contrast, Ripple [XRP] succeeded in surpassing two significant psychological barriers, sustaining its position at $2 despite market instabilities.
This sharp contrast might give investors pause. With minimal capital flowing from BTC to ADA in Q4, the recent 10% surge could potentially be a short-lived uptick.
Rivalries are intensifying, and the battle for supremacy remains ongoing.
The plot thickens — shortly before the new year, substantial ADA holdings were withdrawn from exchanges by major investors, sparking the recent upsurge and compelling short-sellers to scramble in an effort to repurchase the asset.
While this development may offer Cardano a temporary boost, transforming $1 into a firm support level remains a challenging feat.
Why?
Unless the ADA/BTC pair mirrors the November cycle by posting extended periods of positive growth, the rally cannot be sustained by whales alone.
The upcoming days carry immense importance. Should BTC maintain a moderate level of activity, capital might flow into ADA from investors. Nevertheless, the ultimate test dwells in whether significant investors can push ADA past the $1 threshold and maintain this position.
Otherwise, the recent short squeeze might rapidly dissipate, dragging ADA back into a slump.