ADA price corrects after hitting a 2.5-year high above $1.15, and a handful of factors, including reducing trading volume, are weighing on Cardano.
Cardano ADA$1.04 is showing weakness today, trading at $1.051, down 1.2% over the last 24 hours. Reduced trading volume and several onchain signals suggest that ADA could slip lower soon.
Let’s look at the factors driving Cardano price down today.
Reduced trading volume hurts ADA price
ADA price has been up more than 225% since Nov. 5, when Americans went to the polls in an election that saw Republican Donald Trump emerge victorious.
During this rally, ADA’s trading volume soared from roughly $241 million on Nov. 5 to reach $6 billion on Nov. 16, as per Santiment data.
This metric shot again to ADA’s latest rally to $1.15, setting a 2.5-year high of $6.2 billion on Nov. 24, before dropping sharply to the current level of $3.7 billion.
Trading volume is a market indicator used to gauge trader interest by measuring the total value of tokens exchanged within a certain period of time. Rising volume signals heightened investor interest, often preceding a price growth. On the other hand, declining volume indicates waning interest, often resulting in lower prices.
Therefore, if Cardano’s trading volume continues to drop, it will signal reduced demand for the layer-1 token, increasing the likelihood of further price depreciation in the short term.
Cardano liquidity concentration drops to $0.94
Another factor that facilitates ADA’s downside is the liquidation heatmap, a metric that points out price levels where massive liquidations are likely to occur, according to CoinGlass.
When the liquidity is concentrated at a certain point, it often indicates the likelihood of the price dropping toward that area. Levels of high liquidity concentration are represented by a yellow color on the liquidation heatmap.
The 24-hour liquidation heatmap for Cardano shows that the liquidity is concentrated around the $0.94 level. This suggests that ADA price has a good chance of testing $0.94 as support in the short term.
ADA technical setup signals price drop to $0.95
Data from TradingView shows ADA trading at $.107 at the time of publication, 7% below the multi-year high above $1.15, which has expanded the Bollinger Bands (BB).
The BB is a technical indicator that measures the volatility around an asset. Depending on the buying or selling pressure in the market, an expanded BB can detect possible overbought and oversold conditions.
A potential sell opportunity arises when the price touches the upper band, which is a sign that the price is overbought.
The price is currently touching the upper band, suggesting that investors could continue booking profits at current levels, which can precipitate a drop to $0.95, the 23.6% Fibonacci retracement level.
The overbought conditions are supported by the position of the relative strength index (RS) in the overbought territory at 84. In fact, the RSI shows ADA has been massively overbought since Nov. 11.
Conversely, this situation might change if demand increases with a resurgence in trading volume. The price could jump back to $1.15 in such a case before moving higher.
Pseudonymous crypto investor and analyst DW shared a chart showing ADA price in a V-shaped recovery on the hourly chart, setting the target at $1.32.
“Cardano ADA faces a short-term bubble risk with a ‘2’ alert, signaling potential price volatility,” said fellow analyst CryptoniteUae in a Nov. 25 post on X.
The analyst expressed confidence that ADA’s “long-term momentum remains bullish” as the price retests key support areas, and a successful defense of these levels sets the stage for further gains.
“Investors should stay cautious short-term but remain optimistic about Cardano’s recovery potential.”
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