Cardano (ADA) has found itself under intense scrutiny as on-chain data indicates a looming correction of up to 21%. The altcoin, currently trading at $0.34, has seen a recent downturn of 3%, and technical indicators suggest that the sell-off could intensify. This article explores the reasons behind the expected drop, the key levels to watch, and what Cardano holders can anticipate in the coming days.
Cardano’s High NVT Ratio: A Red Flag for Overvaluation
At the core of the bearish outlook is Cardano’s Network Value to Transactions (NVT) ratio, which has spiked to its highest point since February 2023. According to Santiment data, Cardano’s NVT ratio now stands at 12.13, signaling overvaluation.
The NVT ratio is a metric used to assess whether an asset is overpriced relative to the amount of activity happening on its blockchain. A high NVT ratio indicates that Cardano’s price is disproportionately high compared to its transaction volume, a sign that the current rally may not be supported by actual network demand. Historically, assets with elevated NVT ratios are at risk of price corrections, as it suggests that speculative activity has outpaced real usage.
Declining RSI Further Supports Bearish Outlook
In addition to the overvaluation concerns, Cardano’s Relative Strength Index (RSI) is also flashing warning signals. Currently, the RSI sits below the 50-neutral line at 48.57, indicating that buying pressure is waning and sellers are gaining control.
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The RSI is a momentum indicator that measures the speed and change of price movements. When the RSI trends downward and dips below the neutral level, it indicates weakening market sentiment. In the case of Cardano, the declining RSI shows that bullish momentum is fading, which could prompt traders to sell, further exacerbating ADA’s price drop.
Critical Support Levels: Will ADA Break Below $0.3479?
Cardano’s price has been testing the critical support level of $0.3479 in recent trading sessions. If selling pressure increases, a breakdown of this support level could push ADA to its August 5 low of $0.27, marking a potential 21% decline from its current price.
The August low of $0.27 is a key level for Cardano, as it represents the last major support before a more substantial downward movement could occur. If ADA fails to hold this level, the drop could trigger a broader sell-off, as more traders might lose confidence in the asset’s short-term prospects.
Read more:Cardano’s 88% Price Crash: Is Recovery Possible?
The Bullish Case: Can ADA Rally Back to $0.47?
Despite the bearish indicators, there’s still a glimmer of hope for Cardano bulls. If buying activity picks up and ADA manages to defend the $0.3479 support level, it could ignite a recovery that takes the cryptocurrency back toward the $0.47 mark, a high last seen in June 2024.
This optimistic scenario depends on whether traders regain confidence and buying pressure returns to counterbalance the recent sell-off. If ADA can hold the line and start building upward momentum, a rally toward $0.47 would represent a significant reversal in its short-term fortunes.
Read more:ADA’s Bullish Surge: Can Cardano Break Free from the $0.30 Range?
Final Thoughts: Is Cardano Headed for a Steep Decline?
Cardano’s recent price action and on-chain data suggest a challenging period ahead. With an overextended NVT ratio and a declining RSI, the altcoin appears poised for a potential 21% correction unless buyers step in to defend key support levels. ADA holders should closely monitor the $0.3479 support zone, as a breakdown below this level could signal a deeper price decline.
On the other hand, if Cardano manages to hold this support and sees renewed buying pressure, it could chart a path back toward $0.47. As always in the volatile world of crypto, much depends on market sentiment and external factors, so traders should stay alert and prepared for both scenarios.
Key Takeaways:
- Overvaluation Concerns: Cardano’s NVT ratio signals that the asset may be overpriced, raising the risk of a price correction.
- Critical Support: A breakdown below $0.3479 could push ADA down to $0.27, representing a 21% drop.
- Bearish Indicators: Cardano’s declining RSI shows weakening buying pressure, reinforcing the potential for a further price decline.
- Upside Potential: If ADA can hold its current support, it could rally toward $0.47, a level last seen in June.
As the cryptocurrency market remains highly volatile, Cardano investors should remain cautious and keep an eye on key technical levels to navigate the next phase of ADA’s price journey.