As the weekend approaches, the overall cryptocurrency market has begun to recover, showing signs of an upward rally. Amid this recovery, ADA, the native token of the Cardano blockchain, appears bullish and is poised for a significant rally in the coming days.
Cardano (ADA) Technical Analysis and Upcoming Levels
According to expert technical analysis, ADA has formed a bullish inverted head and shoulders pattern and is now on the verge of a breakout. Based on recent price momentum, if the asset breaches the pattern’s neckline and closes a four-hour candle above the $0.76 level, there is a strong possibility it could initially soar by 10% to reach $0.85 in the coming days.
Source: Trading View
However, amid this rally, ADA may face resistance from the 200 Exponential Moving Average (EMA), which currently indicates that the asset is in a downtrend. This bullish thesis will hold only if ADA breaches the $0.76 level, otherwise, the bullish outlook may fail.
However, on a longer time frame, ADA appears to be consolidating within a tight range between $0.73 and $0.757 over the past five trading days and is now attempting to break out. If the asset breaches this consolidation and closes a daily candle above the $0.76 level, it could soar significantly by 50% to reach $1.15 in the coming days.
Source: Trading View
Major Liquidation Levels
At press time, both bulls and bears are making strong bets on the asset, as reported by the on-chain analytics firm Coinglass. Data reveals that traders are currently over-leveraged at $0.723 on the lower side, with $12 million worth of long positions.
Source: Coinglass
Meanwhile, $0.765 is another over-leveraged level, where traders have held $10.50 million worth of ADA tokens.
Cardano (ADA) price risks a decline amid the upcoming Ethereum Pectra upgrade as historical patterns indicate that network improvements on ETH have not always boded well for ADA. Pectra is going live today, May 7, and Cardano is defying the odds with an intraday gain of 2% at press time. However, will history rhyme and force ADA to plunge and possibly lose crucial support at $0.66? Let’s explore.
Why Cardano Price Faces Pressure from Ethereum’s Pectra
The Cardano vs. Ethereum battle for dominance has been ongoing for years, considering that the two are some of the oldest layer one networks in the crypto industry. This battle has often led to ADA facing bearish pressure whenever there are improvements on the Ethereum network to improve its scalability and usage.
For instance, Cardano price recorded its steepest correction in 2021 that began after the London upgrade that introduced a mechanism to burn part of transaction fees to make ETH more deflationary. In 2022, ADA also declined after the Ethereum Merge that transitioned the network from proof-of-work to proof-of-stake.
Cardano Price Chart
The most recent ETH upgrade happened early last year when Cardano faced a 65% decline after Dencun. If history rhymes and the upcoming Pectra upgrade fuels a decline for this ETH rival, the ADA price is at risk of a steep downtrend.
Looming Long Liquidations Put ADA at Risk
If Cardano will crash and lose critical support as history rhymes, the cluster of long liquidations that are around $0.66 will fuel an even steeper downtrend. The liquidation map shows that more than $5.4 million in long ADA positions will be closed if the price falls to this level, and this will trigger a spike in selling pressure.
ADA Liquidation Map
Analyst Kamil reacted to this situation, stating that “ADA traders are playing with fire” as the high leverage on this altcoin will cause Cardano volatility as millions of positions are closed. Besides the high long leverage, another analyst also noted that a decline in whale activity and transactions will have a bearish effect on the Cardano price prediction. He said,
“Whales are stepping back and transaction has been down up to 83%. Still watching out for its momentum to get stable otherwise we will embrace weakening confidence from big players.”
These market conditions indicate that it is likely for the price of Cardano to face downward pressure in the coming weeks, and this will match the historical patterns whereby the altcoin dropped when the Pectra upgrade went live.
However, a spike in network activity may invalidate this bearish outlook towards the altcoin, as data from DeFiLlama reveals that the stablecoin market cap on the blockchain has reached an all-time high. This points to increased network usage that may bolster ADA’s utility.
Cardano Technical Analysis
The four-hour Cardano chart shows a mixed ADA technical outlook. The RSI has been rejected in its attempt to cross above 50, showing that the recent surge in buying pressure is waning, and this may cause a resumption of the downward trend depicted in the descending parallel channel.
However, Cardano price is teasing to break out from this channel, and the MACD has formed a buy signal after crossing above the signal line. A strong breakout from the bearish pattern will only occur if it makes a strong close above the resistance trendline, and the RSI also makes a higher high above 50.
ADA/USDT: 4-Hour Chart
To sum up, Cardano may be on the verge of a downward correction if history rhymes and the upcoming Pectra upgrade on Ethereum stirs a price decline. This bearish thesis will be invalid if ADA can make a decisive close from a descending trendline, as this will confirm that the trend is about to shift from a negative one to a sustained uptrend.
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