Cardano (ADA) Faces Crucial Resistance with 50% Correction Risk Ahead

Key Takeaways

• Cardano’s price has failed to break above the upper trendline of the descending triangle.
• Trading activity around ADA has decreased, hindering a return to the bullish phase.
• ADA’s price has broken below the $0.70 support and risks falling to October lows.

Cardano’s (ADA) price has dropped to its lowest level in three months, aligning with the broader market trend. The decline came as BTC struggled to maintain momentum, straying further from the $1 mark.

Despite efforts to regain upward momentum, ADA’s failure to push past key resistance levels has raised concerns about an extended correction.

Will the token be able to resist further downturns, or is there another decline on the cards?

Rejection Hinders ADA’s Progress

On Jan. 20, Cardano’s price rallied above $1. However, as the cryptocurrency attempted to aim higher, it faced rejection at $1.23.

Since then, the altcoin has been unable to retest that region. This decline has led to the formation of a descending channel.

A descending channel is a pattern signaling that connects lower highs and lower lows. While this pattern is bearish, a break above the upper trendline could invalidate the thesis and lead to a higher value.

However, in this instance, ADA still trades within the descending channel. The Ichimoku Cloud on the daily chart remains above Cardano’s price.

The cloud measures support and resistance. When it’s below the price, it signals support.

However, with the cloud above it, ADA seems to have experienced resistance. If this holds, an extended downtrend may follow.

On-Chain Analysis Supports Bearish Outlook

From an on-chain perspective, Santiment data shows that the Mean Dollar Invested Age (MDIA) continues to increase. The MDIA is the average age of all tokens on a blockchain weighted by the purchase price.

Typically, a falling MDIA suggests holders are actively trading their tokens, which is a bullish sign. However, Cardano’s 90-day MDIA is rising.

This increase shows market participants are keeping their ADA tokens dormant, making it harder for the price to rise due to low trading activity stifling movement.

Should this dormancy continue, ADA’s price will unlikely move toward the $1 direction.

ADA Price Remains Weak

As it stands, Cardano’s price has dropped below the support at $0.70. This same support, situated at the 0.382 Fibonacci level, was what led ADA to rebound to $0.82 on Feb. 18.

However, it appears that the token might fail to replicate such a bounce. This potential could be attributed to the position of the Awesome Oscillator (AO).

The AO measures momentum using the recent and historic price movement. When the reading is positive, momentum is bullish.

However, since the reading is negative, it means that the ADA’s momentum is bearish. If this trend continues, the price is likely to drop below the next support level of $0.56.

Cardano’s price might crash by 50% to $0.32 in that scenario. On the contrary, if the price breaks above $0.70, this prediction might not come to pass.

Instead, ADA could climb to $0.94. If the broader market situation gets highly bullish, it could retest $1.11.