After reaching a recent peak of $1.3 a week ago, Cardano [ADA] has witnessed a significant drop, hitting a bottom of $0.911.
Presently, Cardano is trading at $1.02, reflecting a 12.25% decrease on a daily basis. Prior to this decline, the altcoin had been on an upward trend, surging by 75.91% on a monthly scale.
The current market situation has sparked discussions among analysts, including Ali Martinez, who regards $1.2 as a vital support level.
Evaluating Market Sentiment
Martinez’s analysis highlights Cardano’s significant support level around $1.2, where 93,000 addresses collectively hold 2.54 billion ADA tokens.
If the price falls below this crucial level, there is a risk of it dropping below $1 until it gains positive momentum once again.
Referencing the 2020 cycle, the analyst notes similarities in Cardano’s behavior. Back then, Cardano soared from $0.141 to $1.547 in a strong rally.
Therefore, the current downturn might present a buying opportunity, potentially leading to a recovery that could drive ADA’s price to the range of $4 to $6.
Interpreting ADA Charts
Following a sharp decline in the last week, CryptoCrypto’s analysis indicates a shift in sentiment for Cardano, transitioning from a bullish to a bearish stance as sellers exert influence in the market.
This dominance of sellers is evident through ADA’s Relative Strength Index (RSI) which has dropped from 79 to 53, signaling increased selling pressure.
Moreover, Cardano’s active addresses have dwindled from 170.83k to 90.36k, indicating reduced network usage, adoption, demand, and investor interest.
This decline in network activity is further emphasized by the recent rise in the NVT ratio (network value to transaction ratio). Cardano’s NVT ratio has surged from 11.63 to 54.03, suggesting that the market cap is growing faster than transaction volume.
Generally, elevated NVT ratios indicate market peaks or overbought conditions. Consequently, if transaction volume fails to catch up, prices tend to drop as speculative activities diminish.
Finally, the shift in market sentiment is evident as more investors opt for short positions. Based on Coinglass’s long/short ratio, short positions account for 52% of the total, indicating a prevailing bearish outlook among investors.
In essence, Cardano is presently in a corrective phase and may witness further declines. Should these pessimistic sentiments persist, ADA’s price could dip to $0.9, and if bearish attitudes prevail, it might drop to $0.77.
Nevertheless, a reversal in the trend could see Cardano reclaim the $1.2 levels.