Cardano Price Analysis: ADA Briefly Dips Below Bearish Pattern – Will it Lose $0.60?

This would be the fourth consecutive day of losses for ADA. The token plummeted below a key bearish formation during the Asian session but managed to recover once the American market opened.

Despite the significant downtrend that the crypto market has experienced this year, ADA has been one of the most resilient tokens in the space as its yearly losses currently stand at 22.7% while other smart contract platforms like Ethereum and Solana have seen the value of their utility tokens plunge by 45% and 33% respectively during this same period.

Is Cardano a “Zombie Blockchain”?

Crypto experts continue to claim that Cardano is one of the most heavily overvalued blockchain projects in the space when measured by its TVL to Market Capitalization ratio.

Cardano currently ranks 18th in the list of largest chains by TVL with nearly $333 million locked on its blockchain at the time of writing as per data from DeFi Llama. However, its market capitalization stands at $23.1 billion or 69 times its TVL.

Critics have deemed the project a “zombie blockchain” as developers continue to be reluctant to launch applications in its network.

Executives from the Cardano Foundation emphasize that the project has focused primarily on marketing the blockchain as the best alternative for real-world applications like identity verification or record-keeping.

However, the fact that Cardano has failed to capture most of the relevant trends that have popularized rival networks like Solana or even Sui (SUI) has been a cause of concern among investors.

Moving to the charts, the daily chart shows how ADA dropped to a session low of $0.630 during the Asian session, resulting in a bearish breakout of the bearish pennant formation we have been tracking for a few days.

Momentum indicators have flashed sell signals already as the Relative Strength Index (RSI) crossed below the signal line while the MACD’s histogram shows that negative momentum has been accelerating.

A confirmed break below this support area would result in a total downside risk of 12% for ADA as the price could dive to its nearest daily support area at $0.580.

Hourly Price Action Signals Further Weakness

Moving to the hourly chart, ADA has been on a downtrend since last Wednesday and has already made three consecutive lower highs. The price broke below the $0.660 support briefly but retraced shortly after as the beginning of the American session approached.

The Relative Strength Index (RSI) picked up and sent a buy signal. However, as the dominant trend is bearish, traders should keep an eye on the 68.1% Fibonacci as this is a great area for a retrace.

A confirmed pullback at this point, which typically comes in the form of a huge red candle right after this key level is tagged, would increase the odds of an upcoming retest of the $0.630 intraday support.

This trade offers a high risk-reward ratio ranging from 2 to 4 depending on where the stop price is set. If a retrace does occur, the daily bearish pennant pattern would also be confirmed, meaning that ADA could experience further losses in the near term and the odds of a drop to the $0.580 will dramatically increase as well.