Cardano (ADA) soars over 50% in four days — a bull trap?

Read CoinChapter.com on Google News

YEREVAN (CoinChapter.com) – ADA, the native toke of Ethereum competitor Cardano, soared 50% since May 28. However, the rally stalled on June 1, as the token traded at $0.6 after an intraday correction of 5%. Furthermore, some experts assert that the recent uptrend was a bull trap, and traders can expect more declines in the coming sessions.

For example, a crypto analyst under the pseudonym Technically Crypto expected the Cardano token to drop lower, stating that ADA’s bottom is not in yet. Technical analysis backed his claim, showing a consolidation channel on the daily chart.

Also read: Massive Cardano breakout underway as ADA rises 17% in three days. 

ADA daily price action flashes bearish hints

As mentioned, ADA formed a consolidation channel, hinting at a possible decline. In detail, the Channel entails two flat trendlines parallel to each other. They enclose the price action and maintain a steady swing as the token retest the support and resistance.

The consolidation channel is a continuation pattern; thus, it expects the Cardano token to break the support. Moreover, the plunge could be equal to the previous leg down. Notably, ADA broke above the resistance, not down. But the rally did not look sustainable, as the trading volumes have substantially declined since May 31.

If the Cardano token breaks below the resistance-turned-support, it could fall back into the Channel’s range. In that case, the target price for ADA would stand at $0.15, or 67% lower than the current value.

Also read: Cardano stumbles after weekend run sees ADA jump 30%. 

Moreover, Technically Crypto noted ADA’s dependency on Cardano’s upgrade cycles.

Will Basho save the bulls

According to the chart presented below, Cardano upgrades resulted in three-digit rallies for ADA.

Thus, traders could expect the upcoming Basho upgrade to have a similar effect. In addition, Cardano’s roadmap defined Basho as an “era of optimization, improving the scalability and interoperability of the network,” while the previous Goguen era introduced smart contract functionality.

Also read: Bitcoin to $20K likely as Fed minutes show more aggressive rate hikes. 

However, the Basho launch will not likely commence for another few months.

Thus, the analyst underscored Q4 2022 – Q1 2023 as a possible timeframe for a breakout. Before ADA takes off on a Basho-led rally, it will likely stall and possibly establish lower lows. As of June 1, the token traded nearly 80% below its record high of $3.1.

Please leave this field empty

Subscribe Today
for our Weekly Newsletter

Email Address *

Free Weekly Crypto News without the spam.

Check your inbox or spam folder to confirm your subscription.