Cardano’s Price Reversal: What Investors Need to Know

Cardano’s price recently experienced a sharp reversal after reaching $0.657, its highest level since March 30, and 138% above its year-to-date low. The cryptocurrency, known as ADA, entered a correction phase, falling by 14% from its weekly high and was trading at $0.562 at the time of writing. This decline mirrored the pullback seen in other major cryptocurrencies.

Bitcoin also experienced a similar pullback, retreating from nearly $90,000 to $86,000. This trend was common among major coins, primarily due to profit-taking as many assets had been in a strong bull run in recent days. In most bull runs, financial assets often experience a pause as investors book profits.

Factors Driving Cardano’s Recent Rally

Cardano’s recent rally was influenced by several factors. Charles Hoskinson, the founder of Cardano, hinted at his plans to become more active in U.S. policy following the election of Donald Trump. Additionally, Cardano’s DeFi total value locked (TVL) climbed to $350 million, its highest level in over seven months. This TVL could continue to grow, especially with the anticipated integration of BitcoinOS, which is expected to unlock $1.3 trillion in liquidity.

Moreover, Cardano’s surge coincided with a rise in futures open interest, reaching its highest level in months. It has remained above $500 million for three consecutive days, the first time since March.

Technical Analysis of Cardano’s Price Movement

The daily chart indicates that Cardano’s price formed an inverse head and shoulders pattern before the recent rally. On the positive side, the coin is close to forming a golden cross, a bullish signal that occurs when the 50-day and 200-day moving averages cross. This pattern will materialize only if Cardano’s uptrend continues.

However, there are signs that the rally may be losing steam as the coin forms a bearish engulfing pattern, which occurs when a red candle completely engulfs a preceding small bullish candle. If a reversal takes place, Cardano may fall to the psychological level at $0.45, approximately 21% below its current price. This outlook will be invalidated if ADA’s price jumps and turns this week’s high of $0.657 into a support level.

“Cardano’s recent price movements reflect typical market behavior, where assets experience a pullback after a significant rally as investors take profits.”

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