Cardano (ADA) today shows weakness, trading at $1.051, down 1.2% in the past 24 hours. Trading volume has declined and on-chain signals indicate that ADA may continue to go down in the near future.
Daily chart ADA/USD. Source: TradingView
Let’s consider the factors causing Cardano's price drop today.
Declining trading volume affects the price of ADA
ADA’s price has increased by more than 225% since November 5, when Americans voted in the election that brought Republican Donald Trump to victory.
During this price increase, the trading volume of ADA surged from around $241 million on November 5 to $6 billion on November 16, according to data from Santiment.
This index spiked again as ADA's recent price rose to $1.15, reaching a 2.5-year high of $6.2 billion on November 24, before sharply dropping to the current level of $3.7 billion.
Trading volume is a market indicator used to assess traders' interest by measuring the total value of Tokens exchanged over a certain period. Increased volume indicates heightened investor interest, often leading to price increases. Conversely, decreased volume indicates waning interest, often leading to price declines.
ADA trading volume. Source: Santiment
Therefore, if Cardano's trading volume continues to decrease, this will indicate a drop in demand for this Token, increasing the likelihood of further price drops in the short term.
Cardano's liquidity concentration has dropped to $0.94
Another factor driving ADA's downward trend is the liquidity heat map, an indicator showing price levels where large liquidity is likely to occur, according to CoinGlass.
When liquidity is concentrated at a certain point, it often indicates that the price is likely to drop to that area. High liquidity concentration levels are marked in yellow on the liquidity heat map.
Cardano's 24-hour liquidity heat map shows liquidity concentrated around the price level of $0.94. This suggests that ADA has a good chance to test support at the $0.94 level in the short term.
Cardano liquidity heat map. Source: CoinGlass
ADA's technical setup signals a price drop to $0.95
Data from TinTucBitcoin and TradingView shows ADA trading at $0.107 at the time of publication, down 7% from a multi-year high above $1.15, expanding the Bollinger Bands (BB) index.
BB is a technical indicator measuring volatility around an asset. Depending on buying or selling pressure in the market, an expanded BB can identify potential overbought and oversold conditions.
A potential selling opportunity arises when the price hits the upper band, indicating that the price is overbought.
The price is currently touching the upper band, suggesting that investors may continue to take profits at the current level, which could lead to a drop to $0.95, the 23.6% Fibonacci retracement level.
Daily chart ADA/USD. Source: TradingView
Overbought conditions are supported by the position of the Relative Strength Index (RSI) in the overbought zone at 84. In fact, the RSI indicates that ADA has been overbought since November 11.
Conversely, this situation could change if demand increases with a recovery in trading volume. In that case, the price may bounce back to $1.15 before moving higher.
Anonymous cryptocurrency investor and analyst DW shared a chart showing ADA’s price in a V-shaped recovery on the hourly chart, targeting $1.32.
“Cardano ADA faces short-term bubble risks with a ‘2’ warning, indicating potential price volatility,” said CryptoniteUae analyst in a post on November 25 on X.
The analyst expressed confidence that “the long-term uptrend of ADA remains positive” as the price tests key support areas, and successfully protecting these levels will pave the way for further increases.
“Investors should be cautious in the short term but maintain optimistic expectations about Cardano's recovery potential.”
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