3 reasons why Cardano can sink further even though the ADA price has jumped by 58%

3 reasons why Cardano can sink further even though the ADA price has jumped by 58% – Mail Bonus

Cardano (ADA) recovered a large portion of its weekly losses on the cryptocurrency market this week.

ADA’s price peaked at $ 0.60 a day on May 13, the day after recovering from its lowest week-to-date price, $ 0.38 – a 58% increase.

The sharp reversal appeared in the wake of similar price measures in the cryptocurrency market, with the top cryptocurrencies Bitcoin (BTC) and Ether (ETH) increasing by 23% and 25.75% from the lowest yesterday.

Recover the top ten cryptocurrencies in the last 24 hours. Source: Messari

But a sharp ADA recovery does not promise a further upward trend, at least according to the three factors discussed below.

The collapse of the stock market is far from over

First, Cardano’s price changes and similar cryptocurrencies have been locked in with US equities, especially technology equities.

In particular, the correlation coefficient between the ADA and the technical weight of the Nasdaq Composite was 0.93 on May 13, which means that any major stock movement would likely steer Cardano in the same direction.

Correlation between Cardano and Nasdaq Composite. Source: TradingView

In addition, the likelihood of a Nasdaq recovery is currently small, with analysts focusing on overvaluing Big Tech stocks and the likelihood of a further collapse in a higher interest rate environment.

„The [ax] is rather hanging over high-growth technology companies, “says Richard Waters, editor of the Financial Times West Coast, adding:

“This is where the valuation became the most forced and where the market has the most difficulty finding the slump.

Simply put, Cardano’s continued positive correlation with the Nasdaq could lead to further declines in the ADA market, at least for now.

“Fifth Wave Missing” ADA

Secondly, there is another indication of Cardano’s possible price reduction from the technical structure underlined by Capo from Crypto, an independent marketing expert.

The pseudonymist comments that the ADA could fall in the $ 0.30- $ 0.35 range next time, given the possibility of painting the fifth and final wave of a bearish Elliott Wave setup, as shown in the chart below.

ADA / USD two day price chart with bearish Elliott Wave profile. Source: Capo of Crypto / TradingView

The target area coincides with the support area from January 2021, which was before the 850% bull run.

Breakdown of the descending channel

Third, Cardano has been breaking down its months-long downturn in another sign of weakness.

The ADA has been declining within a range defined by two declining, parallel policy lines, which underscores the current trend for traders to buy near the bottom line and sell towards the top line.

But on May 12, the ADA / USD broke below the bottom line near $ 0.568, indicating that traders ignored buying opportunities.

Instead, buyers came close to the $ 0.378 level to accumulate ADA, which led to a price increase, as discussed above. However, the volume of trade in support of the recovery was lower than in sales, indicating a weakening return.

ADA / USD daily price. Source: TradingView

At the same time, the reversal movement showed signs of further weakness after testing the bottom of the descending channel as a resistor – a way to confirm the failure. If the bulls do not manage to turn around the price cap to support, then the chances of the ADA continuing the prevailing decline trend will be much higher.

Related: Look out below! Ethereum derivatives data provide evidence of further elevations from ETH

On the other hand, a critical move above the channel’s lower direction line could cause ADA to test its upper direction line near $ 1.

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