Cardano (ADA), has recouped a large portion of the weekly losses incurred in this week’s crypto-market rout.
The intraday high price of ADA was $0.60 on May 13. This came after the price of ADA rebounded from $0.38 its week-end low — a 58% rally.
In the wake of similar price action in crypto markets, the huge upside retracement was evident with top cryptos Bitcoin and Ether (ETH), rebounding by 23% & 25.75% respectively since yesterday’s lows.
The recovery of the top ten crypto assets in the last 24 hours. Source: Messari
However, the rapid ADA recovery doesn’t promise an extended upward continuation. At least not according to the three factors mentioned below.
Stock market crash is far from over
First, the price movement in Cardano and other crypto-assets has been almost in line with U.S. equity, particularly tech stocks.
Notably, Cardano would likely be influenced by major stock moves if there was a correlation coefficient of 0.93 between ADA (tech-heavy Nasdaq Composite) and ADA (ADA).
The correlation between Cardano Composite and Nasdaq Composite. Source: TradingView
Furthermore, analysts point out that the chances of Nasdaq experiencing a sharp recovery are slim. They highlight the high valuations of Big Tech stocks as well as the possibility of them collapsing further in an environment with higher interest rates.
Richard Waters, West Coast editor of the Financial Times, says that “the [ax] hangs rather than over high-growth technology companies.”
“This is the area where valuations were stretched the most and where the market is having trouble finding its nadir.”
Cardano’s positive correlation with Nasdaq may lead to more steep declines in ADA markets, at least temporarily.
DA’s “fifth Wave Missing”
A second indication of a possible Cardano price drop comes from Capo of Crypto (an independent market analyst).
An anonymous analyst suggests that ADA could fall to $0.30-$0.35 next due to its potential to paint the fifth wave of a bearish Elliott Wave setup. See the chart below.
ADA/USD price chart for two days featuring bearish Elliott Wave setup. Source: Capo of Crypto/TradingView
The target area coincides with the support zone from January 2021, which preceded a bull run of 850%.
Descending channel breakdown
Cardano is breaking down in another sign weakness, below its multi-monthly descending channel.
ADA is trending lower within a range of falling parallel trendlines. This reflects traders’ current strategy to buy near the lower trendline, and sell toward the higher trendline.
However, ADA/USD fell below the trendline at $0.568, indicating that traders had missed the buying opportunity.
As discussed above, buyers rushed to $0.378 to acquire ADA. This led to the price rebound. The trading volume supporting the recovery movement was lower than it was during the selloffs. This indicates a weakening trend in the rebound.
Daily price chart for USD/ADA Source: TradingView
The upside retracement movement showed signs of weakness after testing resistance’s bottom. This was a confirmation of the break. The likelihood that ADA will continue its downtrend if the bulls fail flip the price ceiling to support is much greater.
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A decisive move above the channel’s lower trendline could lead ADA to test its upper trendline at $1.
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