Cardano is currently experiencing a period of consolidation, with potential signs of a further price drop despite positive developments like low inflation and upcoming network upgrades. The asset's price began to consolidate on Saturday following indications of market weakness, particularly reflected in Bitcoin's chart. Cardano recently broke down from a bearish setup, suggesting the possibility of a deeper decline. As the Chang upgrade nears completion, with 79% of nodes already migrated to v9.1.0, the question remains: Can these positive factors prevent an imminent price drop for ADA?
Will Cardano's Low Inflation Rate Influence Price Movement?
Cardano stands out for its network stability, particularly when compared to other blockchains such as Solana (SOL), Avalanche (AVAX), Cosmos (ATOM), and Polkadot (DOT). Cardano’s inflation rate is currently a modest 2.5% per annum, which is notably lower than that of many other blockchain networks. This low inflation rate points to steady and sustainable network growth. On August 9th, Cardano implemented the Hydra upgrade to enhance its scalability. Together with the upcoming Chang hard fork, these network improvements could potentially push ADA above the $1 price level in the future.
Cardano Price Analysis
In the short term, ADA's price outlook remains bearish. The asset recently broke down from a rising wedge pattern, a technical signal that typically precedes further declines. The price is currently trending below both the 50-day ($0.3457) and 200-day ($0.3788) exponential moving averages (EMAs), which reinforces the bearish sentiment.
Key support and resistance levels include:
Resistance 1: The 50 EMA at $0.3457
Resistance 2: The 200 EMA at $0.3788
Support: Around $0.28
The Relative Strength Index (RSI) stands at 40.42, which is close to oversold territory. This suggests that while bearish momentum is strong, the asset could be approaching a level where buying interest may increase. The Chaikin Money Flow (CMF), which measures buying or selling pressure, is at -0.14, indicating that more capital is currently flowing out of ADA than into it, aligning with the bearish outlook.
If ADA's price falls below the $0.28 support level, the current pullback could evolve into a more significant continuation of the bearish trend, with further support potentially around $0.24.
On-Chain Metrics and Market Sentiment
On-chain metrics also support the potential for a short-term drop in ADA’s price. Cardano’s open interest across exchanges decreased by 2.99% over the last 24 hours, and the aggregated cumulative volume delta (CVD), as reported by Coinalyze, is negative at 97.5 million. This suggests that long positions are closing, and short positions may soon increase, indicating further downside risk.
Additionally, data from Messari Research shows that Cardano's transaction count reached a one-year low on August 11, signaling reduced network activity and possibly declining investor confidence, which may be contributing to the current price weakness.
However, there is still a chance for a bullish reversal. According to CoinGecko, Cardano's trading volume increased by 47% over the last 24 hours, even as its price dropped by 5.4% to around $0.331. This divergence between volume and price could be a positive indicator, suggesting the potential for a bullish breakout once the current pullback concludes.
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