Cardano (ADA) rebounded modestly after plunging nearly 30% over the past week, its worst performance in seven days since May 2021, when the Terra collapse triggered a cryptocurrency market crash.
Nonetheless, the ADA token seems poised for a strong recovery in the coming months, according to technical analysis.
ADA price rises 30% from six-month lows
On June 12, the ADA price rallied 2.25% to $0.28, up 27% from last week’s six-month low of $0.22. The rise came alongside gains in other cryptocurrency markets, indicating that investors bought the dip.
Among the reasons that explain Cardano’s bad week is the fact that the United States Securities and Exchange Commission (SEC) has qualified of unrecorded value in lawsuits filed against exchanges Binance and Coinbase.
On June 9, American investment platform Robinhood, which allows users to buy and sell cryptocurrency, announced that it would be removing the ADA token from its platform. This preceded a 30% drop in the ADA price on the day.
Cardano was also part of the services offered by the Crypto.com exchange to its US-based institutional clients. On June 9, the company ended those services, thus restricting ADA to its potential base of majority investors in the United States.
Most oversold Cardano since March 2020
Cardano technical data, however, points to a possible bounce in the future. For example, the token’s current rally comes a day after its daily RSI fell to 20, the most oversold level since March 2020.
Oversold RSI readings usually precede price consolidation or recovery action.
For example, the price of ADA spiked 900% four months after the March 2020 oversold readings. It was also due to the policy of quantitative easing from the Federal Reserve, which fueled bullish sentiments in riskier markets.
However, the Federal Reserve is willing to continue raising interest rates as inflation persists, which should remove excess cash from the market. In addition, the SEC’s crackdown on cryptocurrencies has created unfavorable market conditions in the United States for crypto assets such as ADA.
Therefore, an oversold bounce, if it occurs, could be weaker than what the market saw after March 2020.
On the three-day chart, ADA appears within the range of $0.247-0.382, similar to its price trends in January 2021 and January 2023, as shown below.
Therefore, a bounce from the support from $0.247 can start an uptrend towards $0.382 in October 2023. Resistance at $0.382, 40% above current levels, also coincides with the 200-3D EMA ( the red wave).
Conversely, a decisive close below the $0.247 support gives the bears more fuel to sink the price towards $0.19, down around 30% on Oct 2023, a resistance-turned-support level in the period. from July 2020 to December 2020.
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