Cardano's ADA Plunges 20% After US Crypto Reserve Announcement
1min read Cardano (ADA), the fifth-largest cryptocurrency by market capitalization, has experienced a significant correction following a weekend rally. The digital asset dropped by approximately 20% after surging by 60% on Saturday, as investors reassessed their positions in the wake of a major announcement.
The rally was sparked by news that ADA would be included in the US crypto reserve, pushing its price above $1.10. This development fueled strong bullish momentum, with key indicators such as BBTrend and DMI confirming the strength of the uptrend. However, the excitement surrounding the announcement appears to be waning, as ADA has since corrected below $1, with technical signals suggesting that selling pressure is increasing.
Cardano's BBTrend indicator, a volatility and trend-following metric derived from Bollinger Bands, initially surged from a deeply negative -14.5 to 7.1 within a few hours, signaling a shift in momentum. However, the indicator has since reversed, plunging back to -13.4, suggesting that the initial excitement surrounding ADA's inclusion in the US crypto reserve has faded. This rapid decline indicates that bullish momentum has weakened significantly, and ADA could now be facing a period of retracement or consolidation.
The Directional Movement Index (DMI) for Cardano has also shown a significant increase in trend strength, with the Average Directional Index (ADX) surging from 28.3 to 43.7 following the announcement. However, the +DI (positive directional index) has dropped from its high of 66.5 to 41, signaling that bullish momentum has cooled off. Meanwhile, the -DI (negative directional index) has climbed from 4.7 to 14.1, showing that sellers are starting to push back. The combination of a high ADX with a falling +DI and rising -DI suggests that while the trend remains strong, bullish dominance is fading, and selling pressure is increasing.
As traders assess whether ADA can sustain its gains or enter a deeper retracement, key support and resistance levels will be crucial in determining the next move. If ADA fails to hold its current levels and selling pressure intensifies, it could test the $0.90 support level. A breakdown below this could open the door for further declines to $0.81 