Cardano has been in the red for several weeks, falling 8.77% on the daily charts and down 14.45% in the last week. It currently changes hands at $0.8864, with ADA’s performance fuelling a heated debate about its future direction. Though the underlying market fundamentals remain bearish, one analyst has gone against the grain by calling for a potential ADA rally to $6 based on past performance.
The Bearish Trend: ADA’s Current Struggles
ADA has been falling hard since it hit a local high of $1.3. It went as low as $0.77 this week and the selling pressure is growing. The bearish trend is being blamed on the weakening on-chain metrics and lack of market activity.
One key indicator, the Price DAA divergence, is still negative, meaning ADA’s price and market cap are not supported by an increase in on-chain activity. Large transactions by major holders also hit a monthly low, further dampening the optimism.
Adding to this bearish sentiment, Cardano’s NVT ratio has gone from 9.17 to 38.12. This means the market cap of ADA is growing faster than its on-chain activity, indicating speculation over fundamentals driving prices.
Optimism from Historical Trends: Analyst Sees $6 Rally
Against this backdrop, independent crypto analyst Ali Martinez is more optimistic. He says Cardano is repeating its 2020-2021 cycle, where the Altcoin rallied big time after a market correction.
Martinez notes that during the 2020 bull run, ADA price went from $0.088 to $0.19 then pulled back to $0.12. After that correction, it rallied 750% to $1.02 in February 2021.
Applying this framework to the current market of ADA, Martinez says the same scenario will play out. However, this will only happen if there’s a trend reversal and on-chain activity to support the upward momentum.
What Needs to Change for Cardano to Rally?
While history gives some hope, there are still significant resistance levels and market challenges for ADA to overcome.
It would need to break the critical price levels of $1.2, $1.6, $1.8 and $2.4. Each of these levels is a psychological and technical hurdle that ADA must clear before it can reach $6.
On the other hand, sustained price growth for ADA will require a big increase in on-chain activity, such as daily active addresses, transaction volume, and large-holder participation. Without that, any rally will be short-lived and speculative.
Broader market sentiment and macroeconomic conditions will also play a big role. Bitcoin’s performance, regulatory developments and overall investor sentiment in crypto may accelerate or hinder ADA’s recovery.
ADA: Correction Before Rally?
Given the current market, ADA is still in correction mode. It might drop to $0.85 in the short term before finding stability, according to analysts.
Once the correction is over, ADA might make $1.0 as the first hurdle to recovery. The journey to $6 is still a long shot and will depend on how it clears technical and market hurdles.
Conclusion
Cardano at $6 is an ambitious vision, both with hope and uncertainty. Although historical trends and analyst’s predictions from Ali Martinez gives some hope, the challenges ADA is facing in the current market can’t be ignored. For ADA to start a big rally, it will take more than just a series of trend reversals; it will also require on-chain activity growth and broader market support. As of now, the road to $6 is a marathon, not a sprint.
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FAQs
1. What is the current price of Cardano (ADA)?
As of this publication, ADA is trading at $0.8864, reflecting an 8.77% daily decline and a 14.45% drop over the past week.
2. Why is ADA bearish?
ADA is bearish due to weak on-chain activity, the decline in large holder transactions and an inflated market cap driven by speculation rather than fundamental demand.
3. What are the resistance levels that ADA needs to clear to reach $6?
ADA needs to break the critical price levels of $1.2, $1.6, $1.8 and $2.4 before it can reach $6.
4. What will bring Cardano back to life?
Cardano’s recovery will depend on increased on-chain activity, renewed market participation, and favourable macroeconomic conditions in the cryptocurrency space.
