After reaching a recent peak of $1.3 seven days ago, Cardano [ADA] has undergone a significant downturn, hitting a bottom of $0.911.
Presently, Cardano is trading at $1.02 as of the latest update. This drop represents a 12.25% decrease in daily trading figures. Prior to this decline, the altcoin had been on an upward trend, surging by 75.91% over the course of the last month.
The recent developments in the market have sparked discussions among analysts. One such analyst, Ali Martinez, has identified $1.2 as a crucial support level for Cardano.
Assessing Market Sentiment
According to Martinez’s evaluation, the $1.2 level is critical for Cardano, as 93,000 addresses collectively hold 2.54 billion ADA tokens at this point.
If the price falls below this level, there is a risk of the altcoin dipping under $1 until it gains a new momentum upwards.
Nevertheless, Martinez has highlighted that ADA appears to be mirroring the market trends seen in 2020. Back then, Cardano experienced a vigorous surge from $0.141 to $1.547.
Thus, this current decline might create a chance for investors to enter the market, leading to a potential recovery. Martinez has suggested that a rebound could propel ADA to the range of $4 to $6.
Decoding ADA Charts
After a significant downturn in the past week, CryptoCrypto’s analysis indicates that Cardano’s sentiment has shifted from optimistic to pessimistic, with sellers exerting dominance over the market.
This dominance by sellers is exemplified by a decline in ADA’s Relative Strength Index (RSI) from 79 to 53, signifying heightened selling pressure in the market.
Moreover, the number of active addresses related to Cardano has fallen from 170.83k to 90.36k. A decrease in active users indicates reduced network utilization, adoption, demand, and investor interest.
The decline in network activity is further accentuated by the recent uptick in the NVT ratio (which measures transaction volume). Cardano’s NVT ratio has surged from 11.63 to 54.03, suggesting that the altcoin’s market capitalization is increasing at a faster pace than its transaction volume.
Traditionally, elevated NVT ratios are linked to market peaks or overbought conditions. If the transaction volume does not catch up, prices tend to fall as speculative activity diminishes.
Lastly, the market sentiment shift is evident in the escalating number of investors taking short positions. As per Coinglass’s long/short ratio, short position holders now account for 52% of the total, indicating a general anticipation of price declines among most investors.
In essence, Cardano is currently undergoing a corrective phase and may witness further declines. Should these negative sentiments persist, ADA could drop to $0.9 initially, with bearish tendencies potentially pushing it down to $0.77.
However, a reversal in trend would enable ADA to recapture the $1.2 levels.