Key Insights
- Cardano saw a 23% surge this week, but on-chain data and liquidation signals suggest a possible distribution phase ahead. Will ADA break $3 this year or face resistance?
As of the latest update, Cardano (ADA) recorded a 3.52% increase in the last 24 hours, pushing its weekly gain to over 23%. While the recent uptrend has propelled the altcoin to new highs, there are indications that caution is warranted.
Is Cardano’s 23% Surge Signaling a Market Correction?
Market metrics suggest that ADA might be approaching overbought territory, with investors adjusting their positions accordingly. This aligns with the outlook for the altcoin presented by AMBCrypto.
Profit-taking could trigger a downturn
At the moment, Cardano’s Net Unrealized Profit and Loss (NUPL) remains well above zero, indicating that most holders are currently in profit.
Historically, such high profitability levels have preceded market downturns as investors seek to secure their gains, leading to a potential downtrend.
Source: Alphractal
With ADA’s recent gains, signs of a potential distribution phase are starting to emerge.
Joao Wedson of Alphractal also echoed this sentiment, suggesting a cooling-off period before a potential rally towards $3 by October or November.
Interestingly, he has identified $4.90 as a key selling zone.
Source: TradingView
TVL on the rise – A sign of commitment or a potential trap?
There has been significant activity in Cardano’s decentralized finance (DeFi) ecosystem and on centralized exchanges, indicating a shift in market dynamics.
In the DeFi space, ADA’s Total Value Locked (TVL) has surged by 3.44% in the past 24 hours, as reported by DeFiLlama.
Source: DeFiLlama
An increase in TVL often indicates that investors are staking their ADA to earn rewards, reflecting a positive long-term sentiment.
The recent spike in TVL to $313.75 million suggests that long-term investors are seeking passive income opportunities despite the potential distribution phase.
In the spot market, selling pressure is evident as ADA is being offloaded.
According to CoinGlass data, $280,000 worth of ADA exited exchanges in the last 24 hours, marking a significant outflow following days of accumulation.
Bulls and bears at a standstill? Not quite
Sentiment in the derivatives market appears mixed, with buyers holding a slight edge.
Current liquidation data on Coinalyze shows nearly equal volumes for long and short positions in the perpetual market.
Source: Coinalyze
Approximately $4.9 million in liquidations were seen on both long and short positions, highlighting uncertainty in ADA’s market direction.
Despite the indecision, the Long-to-Short Ratio suggests a prevailing bullish sentiment.
Buyers accounted for 76.22% of recent trades, while sellers made up 23.78%, giving bulls a potential advantage.
However, if selling pressure intensifies, buyers could face significant losses.
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