Cardano (ADA) price is in the process of painting its seventh consecutive monthly red candle as the token fell to its lowest level since February 2021.
The trend was for ADA price to jump almost 800% to $3.16 between February 2021 and September 2021, followed by a complete erasure of those gains going into October 2022. Interestingly, all the price action took the form of the “Burj Khalifa”, the world’s tallest skyscraper in Dubai.
Ada Khalifa pic.twitter.com/KE2SxTO3bN
— Trader_J (@Trader_Jibon) October 19, 2022
ADA price contemplates a 35% price drop
The ADA price correction began primarily in the wake of a similar downward trend across the cryptocurrency market, led by aggressive interest rate hikes by the Federal Reserve to control rising inflation.
Not even an optimistic upgrade of the Cardano network, dubbed Vasil, was enough to get its buyers back on the market.
In particular, the price of ADA has fallen nearly 20% since Vasil’s hard fork nearly a month ago, an upgrade intended to improve its network scalability and smart contract capabilities.
Also, The ADA/USD pair also broke down from a key support level that may lead to another major drop in Q4.
Such support level around $0.42 constitutes a descending triangle, a continuation pattern. In other words, the potential for ADA to continue its prevailing downtrend is greater if it forms and breaks out of a descending triangle to the downside.
Meanwhile, as a rule of technical analysis, the breakout of a descending triangle during a downtrend usually pushes the price to a level of length equal to the maximum height of the pattern. Therefore, ADA risks falling towards $0.248, or 35%, if the breakout of the descending triangle takes place.
$ADA now losing the lights out level and going to the place where coins go when they die. Prob got a -50% in it from that breakdown level imo
— Pentoshi (@Pentosh1) October 19, 2022
$ADA now losing, turning off their lights and going to the place where the coins go when they die. It’s probably -50% at that drop level, IMO.
And in no way am I messing with the currency. I have posted charts for almost several alts like this including $SOL and $ETH in Dec-Jan
Conversely, a retest followed by a close above the lower trendline of the triangle as resistance increases the chance that ADA will invalidate the bearish outlook. In doing so, pIt could trigger a descending channel setup that forms simultaneously with the ascending triangle, as shown below.
The descending channel setup sees ADA bounce off its lower trendline to test the upper trendline near $0.45 as an immediate target on the upside. In other words, a 30% rebound from the intermediate price.
Macro risks continue
Usually, Cardano continues to advance under macro risks, mainly after September’s 8.2% inflation reading, which raised the possibility that the Fed will continue its wave of rate hikes in the remainder of 2022.
Risk assets in general have seen a decline in enthusiasm from individual investors, who were instrumental in driving crypto prices in 2020 and 2021. For example, Robinhood CEO Vlad Tenev noted:
“In 2020 and 2021, people were really interested in investing in stocks. There was ample participation in the stock market. Now people are talking about gas prices and inflation.”
ADA, whose positive correlation coefficient with the US benchmark S&P 500 index has remained above $0.80 for most of 2022, it also witnessed a sharp decline in its daily active addresses (DAAs) from the November 2021 market high.
Specifically, its 30-day DAA average fell to 165,000 on October 19, its lowest level in two years, according to data from Santiment.
On the other hand, the number of Cardano addresses holding between 100 and 1,000 ADA and between 1,000 and 10,000 ADA tokens has increased during the bear cycle, pointing to a possible accumulation by large investors, or so-called whales.
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