Cardano (ADA) has fallen this July 21, as the market favors growing selling pressure around its most reliable resistance levels in 2022 over an upcoming major hard fork.
ADA Price Could Drop 20% in Early August
ADA price fell 5% on the day to $0.476. The move lower came as part of a broader pullback that began a day after it briefly rose above its 50-day exponential moving average (50-day EMA; the red wave on the chart below) near USD 0.50.
The 50 day EMA has been serving as a curved resistance level for ADA since October 2021.
Additionally, the upper trend line resistance of a broader descending channel pattern reinforced the selling sentiment around the ADA 50 day EMA wave. Earlier in June, the same confluence of resistances had triggered a 35% price drop towards the lower trend line of the channel.
Therefore, the new ADA corrective move risks taking the price to $0.384 in July or early August, which would be a 20% decline from the price on July 21.
2018 Fractal Suggests $0.20 Price for ADA
However, a separate analysis sees ADA falling to levels deeper than $0.384.
Drafted by TradingShot, the ADA Bearish Forecast draws comparisons between the ongoing correction and the one witnessed during the 2018 market crash, as shown below.
In detail, the 2018 chart above shows ADA suffering multiple bearish rejections near its 50 day EMA (the orange wave) while trending lower in a descending channel pattern. The token’s downtrend petered out after correcting almost 93% from its local high.
“Based on the RSI terms for the day, it also looks like we are in the third (3) and final leg below the collapse,” TradingShot wrote, adding:
“So, if ADA holders want to avoid this, they need the price to break above the 1D MA50 and keep trading above it for at least a week. Otherwise, complete a drop from the – 93% from the top is possible around 0.200″.
When the hard fork?
The latest ADA price correction appears in the days leading up to the Cardano hard fork.
Dubbed “Vasil”, the hard fork was supposed to go live in June, but was delayed until the last week of July due to several pending bugs. However, as of July 21, Input Output Hong Kong (IOHK), the company behind the development of the Cardano blockchain, has not announced the exact launch date.
Vasil is expected to bring significant performance and capacity improvements to the Cardano blockchain, including faster block creation and faster transaction speeds. From a fundamental perspective, the update could drive ADA adoption due to improved network efficiency.
But Cardano has a history of strong price corrections after most network updates, suggesting a prevailing “sell the news” sentiment in the market.
For example, the Alonzo blockchain upgrade in September 2021 saw ADA rise in part over 200% to its all-time high of $3.16 prior to launch. But after the upgrade, the Cardano token fell by more than 85%.
ADA is up just 25% after bottoming locally at $0.384 on May 10, suggesting that Vasil’s impact on the market has been limited.
But not everyone is convinced. For example, analyst Lark Davis believes that the token will “sweep” after the hard fork as it manages to hold the 50-day EMA as support.
#cardano $ada has broken past its 50 day EMA, now we just need Charles to announce the date of the Vasil hard fork and this puppy will rip! pic.twitter.com/yQTiCiCE6H
— Lark Davis (@TheCryptoLark) July 20, 2022
Until then, the ADA is likely to remain under pressure to “sell the news”, further pressured by ongoing macro risks and their negative impact on crypto markets.
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