According to historical data, Cardano (ADA) is approaching an overvaluation zone after recording an impressive 180% increase over the past month. While many investors expect the upcoming altcoin season to continue driving prices up, on-chain indicators are signaling that ADA may face a correction before establishing a new peak.
The MVRV Long/Short Difference indicator signals bearish pressure.
An important indicator suggesting ADA may be approaching overvaluation is the MVRV Long/Short Difference. This metric measures the profit difference between long-term and short-term investors, providing insight into market conditions:
When MVRV rises, the profits of long-term investors outperform, signaling the potential that the asset is overvalued.
Conversely, when MVRV declines or turns negative, profits lean towards short-term investors, often implying the asset is undervalued.
ADA's MVRV Long/Short Difference | Source: Santiment
According to data, historically, ADA's price peaked when this indicator reached 57.94% in March. Currently, the MVRV Long/Short Difference has risen to 52.71%, warning that ADA may soon fall into a state of overvaluation.
NVT ratio surges.
Data from IntoTheBlock shows that ADA's NVT ratio (Network Value to Transactions) is also rising sharply.
A high NVT ratio indicates that market capitalization is growing faster than transaction value, signaling the potential for high valuation.
Conversely, a low NVT ratio means that transaction volume far exceeds market cap growth, often indicating undervaluation of the asset.
ADA NVT | Source: Santiment
Currently, the increase in the NVT ratio further reinforces the likelihood that ADA could face correction pressure in the short term.
ADA price prediction: Risk of slipping below $1
The daily chart shows that ADA's Bollinger Band (BB) has significantly widened, reflecting high volatility.
ADA's price is currently touching the upper band of the BB at $1.3, signaling an overbought condition.
If a corrective trend occurs, ADA may drop to a support level of $0.92. However, if buying pressure continues to rise, the price could surpass the $1.4 threshold.
1-day ADA price chart | Source: TradingView
Although short-term adjustments may be witnessed, many analysts remain optimistic about the potential of ADA due to positive on-chain indicators and strong ecosystem development.
While ADA faces the risk of overvaluation, technological developments and buying pressure from the altcoin market could play a key role in shaping ADA's price trajectory in the near future.
