Cardano’s steep 35% fall has left holders in panic mode, yet indicators and historical data suggest that ADA is nearing the bottom | Credit: Hameem Sarwar
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Key Takeaways
Cardano’s MVRV ratio has plunged to levels historically associated with bullish reversals.
The token dropped below the rounding top’s neckline but found support at $0.65.
Indicators like the RSI and MFI reveal a bullish reversal, which could fuel ADA’s rebound.
Cardano (ADA) price has seen a sharp 35% decline in the last seven days as the broader market struggles with hawkish conditions. This significant drop, while alarming to some, could be a prime opportunity to acquire ADA at cheaper prices.
This is according to several technical indicators and historical data. As these indicators point toward a potential rebound, this analysis explains how the altcoin may have presented a rare chance to accumulate before higher highs.
One key indicator showing that Cardano’s price has hit the bottom is the Market Value to Realized Value (MVRV) ratio. This ratio tells if a cryptocurrency’s price is undervalued or overvalued relative.
A high MVRV ratio means market participants hold significant unrealized profits, sometimes leading to. Selling pressure. In contrast, a low ratio indicates reduced profitability, leading holders to hold on rather than sell.
According to on-chain data from Santiment, the Cardano 30-day MVRV ratio has plunged to -30.08%. Historically, Cardano hits the bottom when the metric is between -27.15% and-5.85%
When ADA falls, and the ratio reaches these levels, the price returns to higher values. For example, the MVRV dropped to -10% on October 25, 2024, when Cardano’s price was $0.51.
By December, ADA surged to $1.19. CCN also observed a similar pattern in February and March 2024.
If history repeats itself and past performance guides future performance, ADA might experience a significant rebound in the short term.
New Support Found After Previous Loss
From a technical perspective, ADA’s accelerated correction resulted from the formation of a rounding top pattern on the 4-hour chart.
This pattern appeared between Sunday, Jan. 25, and Feb. 2, indicating that Cardano’s price has reached the peak of its bullish trend. Based on the chart below, ADA’s drop below the pattern’s neckline at $0.87 also ensured that the cryptocurrency declined to $0.70.
Amid this price crash, the Relative Strength Index (RSI) and Money Flow Index (MFI) were below the 30.00 and 20.00 oversold thresholds, respectively. However, on the same chart, the MFI and RSI appear to have broken above the decline’s lows.
If sustained, this might confirm that ADA is experiencing a bullish reversal, coupled with the support held at $0.65.
ADA Price Set for Recovery
A look at the daily chart shows that the crest of the wick of the last ADA candlestick rests at $0.56. This indicates that the 0.236 Fibonacci retracement level seems to support Cardano.
Furthermore, the Average Directional Index (ADX), which measures directional strength, has yet to reach a higher reading. This indicates that the ADA’s downtrend is weakening.
If this remains the same, or the ADX reading declines further, Cardano’s price might rebound toward the 0.618 Fib level at $0.94. In a highly bullish scenario, ADA’s price might be $1.11.
On the flip side, a key level to watch is the $0.56 support. Should ADA slide below this region, the token could drop to $0.32, raising fears of the end of the bullish cycle and a fall into the bear phase.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.