Cardano price hit $0.34 today, up 21% from its all-time low on Monday, with two key indicators suggesting ADA could repeat its August drop to $0.40.
Cardano Sees 21% Gain as Bullish Traders Come In
During the crypto market crash and frantic liquidations that swept through crypto markets on Monday, Cardano was one of the hardest hit large-cap altcoins.
Notably, Level 1 Proof of Stake (PoS) coins saw a decline in demand following the approval of the Ethereum ETF. The prolonged decline in buying interest weakened key ADA support levels, leading to rapid declines during the market crash.
Looking at the chart above, we can see that the price of ADA has dropped by 35.12% between July 29 and August 5. Meanwhile, the global altcoin market (TOTAL3) has only dropped by 28.66% during this crazy 7-day sell-off.
This shows that Cardano’s losses during the crash exceeded the market average by more than 6%. When a large-cap asset like ADA underperforms the market, it is often interpreted as a signal that the asset is now undervalued due to increased leveraged trading liquidations.
This often prompts strategic traders to buy such undervalued assets to take advantage of their rebound potential. The ADA/USD chart above showed an early sign of this phenomenon.
Since the August 5 crash, Cardano has risen 21.54%, reaching $0.34 at the time of writing on August 7. However, the overall altcoin market has only rebounded 19.3%.
This shows that investors are looking to emulate ADA after it fell to a new 2024 low on August 5, causing it to outperform the market average as the recovery phase begins.
Moreover, another important data trend in the ADA/USD derivatives markets also highlights a long-term bullish bounce signal. The Coinglass funding rate chart below tracks the fees paid between LONG and SHORT position holders to keep the lending contracts open.
Negative funding rate values indicate bearish trades and vice versa.
Looking at the chart above, we can see that the ADA funding rate is trending towards negative values of -0.006%. This suggests that there is still significant fear in the market after Monday’s large liquidations and ADA has yet to attract a steady flow of new leveraged long positions.
More importantly, the ADA funding rate, which remains negative after rising 21.54% over the past 48 hours, signals that there is further room for gains as bullish traders gradually return to derivatives markets in the coming days.
Current market dynamics suggest that the ADA price may rise further, approaching the $0.40 mark.
ADA Price Forecast: Bulls Target $0.40 Retest
Cardano (ADA) has shown signs of a potential bullish reversal after a sharp decline from $0.42 to $0.28 over the past seven days. The daily chart shows that ADA has experienced a 35.12% drop, followed by a slight recovery.
The price is currently consolidating around the $0.33 mark, indicating that the bears are losing momentum. The RSI indicator, although still in bearish territory at 33.92, has started to curve upward, indicating potential for more buying pressure.
The Donchian Channels reflect a range from $0.28 to $0.45. The lower boundary at $0.28 has proven to be a strong support level as ADA has bounced off this point. This support is crucial for the bulls to protect themselves in order to maintain the upward trajectory.
On the other hand, immediate resistance is at $0.37, coinciding with the middle line of the Donchian Channel. A successful breakout above this level could lead to a retest of the psychological barrier of $0.40 by ADA.
Moreover, recent bullish candles formed over the last two days indicate that buyers are entering the market. If the price can close above the $0.37 resistance, it will signal a bullish continuation. Traders should watch for volume confirmation to support this upward move, as a spike in daily market volume along with a price gap could further confirm the bullish trend.
A sustained break above $0.37 could push ADA towards $0.40, which would provide a bullish outlook for the bulls. However, if the $0.28 support fails to hold, ADA could fall back to lower levels, potentially testing $0.25.
