Cardano (ADA) finds itself at a critical juncture following an impressive 15% price surge over the past week, propelling the cryptocurrency to a two-month high of $0.40.
ADA Price Surge
This rally, fueled by broader macroeconomic optimism, has reignited investor enthusiasm. However, as ADA approaches key resistance levels, two crucial factors emerge as potential obstacles to sustained upward momentum.
MVRV Ratio in Danger Zone
The Market Value to Realized Value (MVRV) ratio, a key profitability metric, has entered a precarious 'danger zone' for Cardano. With the 30-day MVRV ratio reaching 13%, a significant portion of ADA holders are currently in profit. Historical patterns suggest that when this ratio falls between 10% and 18%, investors often opt to secure gains by liquidating their positions. This behavior typically triggers selling pressure, potentially stalling or reversing price rallies. Source: Santiment
RSI Approaches Overbought Territory
Complementing the MVRV ratio’s warning signals, Cardano’s Relative Strength Index (RSI) is approaching overbought territory. This technical indicator, which measures the speed and change of price movements, suggests that ADA may be overextended in its current bullish run. Historically, as the RSI edges towards overbought levels, the likelihood of a market correction increases as buying pressure begins to wane.
Despite these cautionary signals, Cardano’s recent price action paints an optimistic picture. The bullish trend that began in mid-September suggests potential for further gains, with $0.46 emerging as a possible target. However, ADA must first overcome the formidable resistance at $0.42 to realize this upside potential. Market participants must remain vigilant to the interplay between these bullish and bearish factors. A failure to maintain current price levels could see ADA retracing to $0.37, with further downside risk to $0.34 if this support fails to hold.
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