Cardano (ADA) fell on July 21st as the market favors increased selling pressure around its most reliable resistance levels in 2022 against an upcoming major hard fork.
The price of ADA could drop by 20% by the beginning of August
ADA price fell 5% intraday to $0.476. This bearish move is part of a broader pullback that began a day after the stock briefly broke above its 50-day exponential moving average (50-day EMA; the red wave in the chart below) near $0.50.
The 50-day exponential moving average has been acting as an ADA curve resistance level since October 2021.
Additionally, the upper trend resistance of a wider descending channel pattern has reinforced the selling sentiment around the 50-day EMA ADA wave. Earlier in June, the same resistance confluence triggered a 35% drop in price towards the downtrend of the channel.
Therefore, ADA’s new corrective move is likely to push the price towards $0.384 in July or early August, which is about 20% lower from the July 21st price.
Fractal 2018 recommends $0.20 per ADA
However, another analysis sees ADA falling to deeper levels than $0.384.
Compiled by TradingShot, ADA’s bearish forecast draws comparisons between the ongoing correction and what was seen during the 2018 stock market crash, as shown below.
More concretely, the 2018 chart above shows ADA experiencing multiple bearish rejections near its 50-day EMA (the orange wave) while trending lower in a descending channel pattern. The bearish sign of exhaustion has corrected almost 93% from its local high.
“Based on 1D RSI terms, it looks like we are in the third (3) and final leg of the drop,” TradingShot wrote, adding:
“So if ADA holders want to avoid this, they need to see the price break above the 1D MA50 and continue trading above it for at least a week. Otherwise, a -93% drop from the top can be achieved around 0.200. »
When will the hard fork take place?
The latest ADA price correction is seen in the days before the Cardano hard fork.
Dubbed “Vasil”, this hard fork was supposed to launch in June but was delayed until the last week of July due to repeated bugs. 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 capability improvements to the Cardano blockchain, including faster block creation and higher transaction speeds. Fundamentally, the upgrade could boost ADA adoption due to improved network efficiency.
But Cardano has a history of seeing strong price corrections after most network upgrades, suggesting that “news is selling” is prevalent in the market.
For example, Alonzo’s September 2021 blockchain upgrade partially increased ADA by over 200% to its pre-launch high of $3.16. But after the upgrade, the Cardano token dropped more than 85%.
ADA is up just 25% after hitting its local low of $0.384 on May 10, suggesting that Vasil’s influence on the market is limited.
But not everyone is convinced. For example, the analyst Lark Davis believes that the signal will “rip off” after the hard fork, since the 50-day EMA manages to hold as support.
#cardano $ad broke past its 50 day EMA, now we just need Charles to announce the date of Vasil’s hard fork and rip this puppy! pic.twitter.com/yQTiCiCE6H
— Davis Lark (@TheCryptoLark) July 20, 2022
#cardano $ada has passed its 50 day EMA, now we just need Charles to announce the Vasil hard fork date and there is no stopping it! pic.twitter.com/yQTiCiCE6H — Lark Davis (@TheCryptoLark) July 20, 2022.
Until then, ADA will likely remain under pressure to “sell the news,” driven even more by ongoing macro risks and their negative impact on cryptocurrency markets.
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