On December 11, Cardano (ADA) experienced a notable dip to $1.01 but managed to recover, posting a 15% increase over the past 24 hours. This surge has reignited optimism among altcoin holders, leading to hopes that the uptrend may hold steady. However, recent on-chain data raises concerns that this rally may face significant challenges ahead.
Investors Show Hesitation
Despite being one of the top-performing cryptocurrencies in the past 30 days, Cardano's recent price action may not be sustainable. The token reached a two-year high of $1.25 before cooling off and recently making a modest recovery. However, two key factors suggest that this price increase could struggle to maintain momentum.
First, there has been a marked decrease in the holding time of Cardano transactions. This metric, which tracks how long coins are held before being sold, typically signals investor confidence. When holding time increases, it indicates that investors are reluctant to sell. However, the current decline in Cardano's holding time suggests that investors may be losing faith in the asset's long-term prospects. If this trend continues, ADA may struggle to maintain its position above the $1.16 mark.
Price-Daily Active Addresses Divergence Signals Bearish Sentiment
Secondly, the price-Daily Active Addresses (DAA) divergence points to a weakening rally. The DAA metric, which measures the relationship between blockchain activity and price movement, typically shows that a rising price attracts more investor interest and activity. However, Santiment data reveals a 134.26% drop in the price-DAA divergence for ADA, indicating that while the price has risen, the number of active addresses has declined. This bearish divergence suggests that the current rally may not have strong support, raising concerns about a potential pullback.
Bearish Indicators on the Horizon
Looking at the daily ADA/USD chart, additional indicators reinforce a bearish outlook. The Moving Average Convergence Divergence (MACD), a tool used to measure momentum, is currently in negative territory, signaling a lack of bullish momentum. Given this, Cardano's recent price increase to $1.16 may face difficulty extending further.
ADA Price Outlook: Potential Drop Below $1
Under these conditions, ADA's price could retrace to $0.98. However, if market sentiment shifts and momentum turns bullish, there remains a potential for an upward move, with targets set at $1.33 and possibly even toward the $2 mark.
Investors should remain cautious, monitoring key support levels and market sentiment as Cardano's rally faces critical resistance.