Cardano [ADA] Drops 12.13% But Bullish Trends Emerge

Cardano [ADA] has been experiencing a downward trend over the past month, with a 12.13% decrease in value. This decline has weighed heavily on the asset, but it could potentially set the stage for a positive market rally. Historical analysis reveals that a similar downward trend in 2020 led to a significant rally for ADA, ultimately reaching its all-time high.

Currently, ADA is trading within a consolidation channel, mirroring the pattern that preceded its massive surge in 2021. In 2021, after breaching a supply zone, the asset returned to this level, consolidated for several weeks, and then broke out, reaching $3.10. The current movement closely follows this path, as it has breached the supply zone and is now consolidating within it. If this pattern holds, the next target for ADA could be its all-time high of $3.10, representing a 457% gain for investors buying at the current price. Strong market momentum could even extend the rally, pushing the asset to $16.

Market accumulation has been a significant factor supporting ADA’s current consolidation. Data tracking asset inflows and outflows indicates that investors have been accumulating ADA for the past seven weeks, purchasing the asset and storing it in wallets for long-term holding. This group has acquired $379 million worth of ADA, a substantial portion of the market, indicating strong interest. For context, the ADA purchased during this period represents 1.7% of its current market capitalization. This implies that this cohort of investors could trigger a supply squeeze, reducing availability and driving up demand.

Comparing the current momentum from this accumulation to the one that led to ADA’s 2020–2021 rally reveals that the current accumulation rate is 39.6 times higher than during the previous rally cycle. If accumulation continues to rise, ADA’s rally could surpass its previous all-time high and reach the $16 region.

Despite the drop in ADA’s price, sentiment remains bullish, even in the derivatives market. The Open Interest Weighted Funding Rate remains high, indicating that more long contracts are being opened. Continual long bets on lower timeframes will contribute to the asset’s eventual long-term rally, if sustained.