Cardano's Price Drops 15% Despite Bullish Sentiment

Cardano (ADA) has been the subject of significant optimism among its supporters, with social media sentiment reaching its highest bullish mark in over four months. This surge in positive sentiment is attributed to recent regulatory developments, including the classification of ADA’s use case as ‘smart contracts for government services’ by the relevant authorities. The community's enthusiasm has been fueled by this regulatory nod, leading to a notable increase in bullish comments on social media platforms.

Despite the high level of optimism, the technical analysis of Cardano’s price action paints a different picture. The weekly chart for ADA/USDT shows that the cryptocurrency is currently trading around $0.71, having pulled back after an initial surge following the announcement of its inclusion in the Strategic Crypto Stockpile. Technical traders are particularly concerned about the bearish engulfing pattern that formed after the announcement, which suggests a potential shift in momentum back towards the bears. This pattern occurred three weeks ago when a large red candle completely encompassed the prior green candle’s price range, indicating a possible reversal in the trend.

Since the formation of the bearish engulfing pattern, ADA has continued to retrace. The cryptocurrency remains sandwiched beneath the 20-week Exponential Moving Average (EMA) at $0.7883, which is itself trending downward. Below the current price, the 50-week EMA at $0.6679, the 100-week EMA at $0.59, and the 200-week EMA at $0.5255 could act as layered support levels. If ADA fails to secure a foothold above the $0.74-$0.78 range, these EMAs become increasingly relevant for gauging additional downside risk.

Tracing Fibonacci retracements from the all-time high at $3.0984, the chart reveals additional checkpoints above the current resistance. The 0.236 Fib level at $0.8990 stands as the most crucial boundary if bulls can clear the $0.78 resistance. Beyond that, $1.3193 (0.382 Fib), $1.6590 (0.5 Fib), and $1.9987 (0.618 Fib) represent more distant objectives tied to broader recovery scenarios. However, the bearish engulfing formation underscores the reality that momentum has recently swung back to sellers’ favor, suggesting increased downward pressure in the short to medium term unless a swift upside move reverses the underlying trend.

The Relative Strength Index (RSI) near 48 confirms this lingering indecision in the market. The broader altcoin market appears heavily influenced by declining Bitcoin dominance and overarching macroeconomic conditions. Market participants are closely watching the upcoming Federal Open Market Committee (FOMC) meeting and the updated dot plot, which will be pivotal for risk assets. Any indication of quantitative tightening (QT) easing or dovish signals could serve as a catalyst for renewed strength across the altcoin sector.