Cardano Price Faces Potential Reversal, Analyst Warns

Cardano (ADA) experienced an impressive rally in November, benefiting from the broader cryptocurrency market bull run. The ADA token surged by over 220% during the month, making it one of the top-performing cryptocurrencies and boosting its market capitalization to $38 billion. This significant rise propelled Cardano back into the top ten largest cryptocurrencies by market cap.

Factors Driving Cardano’s Surge

Several key factors contributed to Cardano’s recent price surge. The rally coincided with a broader crypto industry boost following Donald Trump’s victory in the U.S. general election. This sparked optimism in the market, and analysts began speculating that a spot ADA ETF could be introduced in 2025, which could further propel Cardano's price.

Additionally, Cardano's surge benefited from expectations that the Trump administration might introduce light-touch regulations for cryptocurrencies, a prospect that has been viewed favorably by many in the crypto industry. Rumors also circulated that Paul Atkins, a well-known crypto-friendly regulator, could be appointed as the next head of the U.S. Securities and Exchange Commission (SEC) under Trump’s leadership, further fueling positive sentiment around ADA.

Charles Hoskinson's SpaceX Deal and Network Developments

Another catalyst for Cardano’s price jump was the speculation surrounding a potential deal between Charles Hoskinson, the founder of Cardano, and SpaceX. Hoskinson fueled excitement when he posted an image standing next to a SpaceX rocket, teasing a significant announcement. Prior to this, Hoskinson had hinted at what he described as the “biggest deal of his career,” leading to speculation that a partnership with SpaceX could be imminent.

Cardano also made headlines for its decentralization efforts, with delegates in Nairobi and Buenos Aires set to vote on the network’s constitution. This historic move is seen as a step toward greater decentralization and a significant milestone for Cardano, marking an industry-first for layer-1 and layer-2 networks in the cryptocurrency space.

Moreover, the network saw a major surge in its total value locked (TVL), reaching a record high of $600 million, further fueling the bullish momentum behind the asset.

Analyst Warns of Potential Price Correction

Despite the impressive gains, some analysts are sounding alarms about a potential price correction. Ali Martinez, a well-known crypto analyst, cautioned that Cardano's price could face a pullback, potentially dropping to $0.88, which represents a 20% decline from its current level. Martinez pointed to the TD Sequential indicator, which has been signaling a potential sell on the three-day chart.

"Cardano $ADA could be preparing for a correction to $0.88 as the TD Sequential presents a sell signal on the 3-day chart," Martinez tweeted on December 1, 2024.

Technical Indicators Signal Reversal

The technical indicators also suggest that Cardano’s price could be due for a brief correction. The daily chart shows that the ADA token has been on a strong bullish trend in recent months, forming a golden cross pattern when the 200-day and 50-day Exponential Moving Averages crossed each other on November 14. This bullish signal was accompanied by a breakout above the key resistance level of $0.8078, which had previously been the highest swing point on March 14, marking the upper end of a cup-and-handle chart pattern.

However, Cardano's Relative Strength Index (RSI) and Stochastic Oscillator are now in overbought territory, signaling that the token may be due for a price correction. Additionally, the MVRV indicator, which measures the market value relative to the realized value, is currently at 2.8, suggesting that the price may not be significantly above its true market value.

Furthermore, ADA has formed a rising wedge pattern on the chart, a technical formation that typically signals a potential reversal. If this pattern plays out, Cardano’s price could drop to around $0.80, marking a brief pullback before any potential continuation of its bullish trend.

Conclusion: A Fork in the Road for Cardano

As Cardano continues to ride the wave of recent gains, the price action in the coming days could determine whether the rally will continue or if the market will experience a short-term correction. While the bullish momentum remains strong due to favorable market conditions and developments within the Cardano ecosystem, technical indicators suggest that a brief pullback to the $0.88-$0.80 range could be on the horizon.