Thursday, September 29

Cardano Price Targets $ 3, But ADA Chart Fractal Suggests Possible 40% Correction


Cardano’s native blockchain asset ADA hit a new high on August 23 as investors pinned hope for an upcoming smart contracts feature that it hopes to drive adoption of the cryptocurrency.

The ADA / USD exchange rate peaked at $ 2,899 around 09:00 UTC, raising expectations that it would easily close above $ 3 in the coming sessions.

Many analysts, including chartist pseudonym PostXBT, indicated that the Cardano token had entered a “price discovery mode”. Meanwhile, David Gokhshtein implied that ADA / USD could continue its bull run until September 12, the day Cardano would integrate the smart contracts feature to its blockchain through the so-called “Alonzo” upgrade.

In detail, the Alonzo update introduces a native smart contract development language called Plutus into the Cardano ecosystem. Plutus is now available for testing and offers functional programming for creating smart contracts for everyday users.

As a result, ADA bulls anticipate that token adoption will increase in the coming sessions, as Cardano attracts dapp developers, operating in the emerging sector of decentralized finance (DeFi) and non-fungible tokens (NFT), to its ecosystem of smart contracts.

Overbought risks

But Cardano technical indicators predict a short-term shock, something that could cause the ADA / USD to correct down by as much as 40% despite maintaining its long-term bullish outlook.

The Daily Relative Strength Index (RSI) of the Cardano token has moved further into its overbought territory, around 83. Traders consider an RSI reading above 70 as overvalued. As a result, he asks them to sell the asset to ensure maximum profits.

ADA / USD daily chart with RSI correction fractal. Source: TradingView.com

For example, an increase in ADA / USD rates in the first quarter of 2021 pushed its RSI reading above 90. Later, the pair began to consolidate sideways while holding support near its 50-day exponential moving average (EMA 50 days; the scarlet wave).

Related: Cardano defies Peter Brandt’s 90% crash warning, ADA price doubles to new high

The price of the ADA now sits on gains of 114% so far this month and 1.511% so far this year. At the same time, an oversold RSI represents an interim profit-taking scenario. So if the Q1 / 2021 fractal repeats, the next ADA support line is approaching its 50-day EMA at $ 1.73, almost 40% below current prices of $ 2.83.

But a correction doesn’t necessarily deplete Cardano’s long-term bullish outlook. Given the potential success of its Alonzo upgrade, the project could end up attracting more speculative offers on the upside for its ADA token. As a result, the ADA / USD exchange rate expects to remain in a price discovery mode.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.