Cardano (ADA) is navigating a challenging period as recent market data points to increased bearish sentiment and heightened volatility. After a 5,65% drop over the past two days, ADA found short-term support at $0,55, but the overall trend remains downward, with technical and on-chain signals suggesting further caution for investors.
On-Chain Metrics Signal Undervaluation
According to Santiment, Cardano’s Market Value to Realized Value (MVRV) ratio has flipped negative, currently sitting at -12,27%. This metric indicates that, on average, ADA holders would realize a 12% loss if they sold at current prices. Historically, a negative MVRV ratio has marked periods when Cardano was undervalued, as seen in early 2024 and during 2022-2023. This could present a potential opportunity for long-term investors, but it also reflects the current lack of confidence in the market.
Derivatives Market: Longs Take a Hit
The derivatives landscape for ADA has seen a notable shift. Open Interest (OI) has dropped to $712,27 million, down 2,15% in the last 24 hours, signaling a slowdown in new capital entering the market. The funding rate has also cooled to 0,0029%, down from a recent high of 0,0075%, indicating reduced bullish momentum.
In the past 24 hours, over $1 million in long positions were liquidated, far outpacing the $180.000 in short liquidations. The long/short ratio has dipped to 0,9429, highlighting a growing preference for short positions among traders. This shift suggests that many market participants are bracing for further downside.
Technical Analysis: Bearish Channel in Play
On the technical front, ADA is struggling to break above its 50-period Exponential Moving Average (EMA) on the 4-hour chart, leading to a pullback to the $0,55 level. The price action is forming a falling channel—a classic bearish continuation pattern—with resistance defined by recent swing highs and support by recent lows.
A close below $0,55 could open the door to further declines, with the next key levels at $0,52 and the psychological support at $0,50. The MACD indicator is flashing a sell signal, while the Relative Strength Index (RSI) has ticked up to 44, hinting at a possible short-term bounce but not enough to reverse the broader trend.
What’s Next for Cardano?
If ADA manages to close above the 50-day EMA, it could target the upper boundary of the channel and the 200-day EMA near $0,63. However, as long as bearish momentum persists and on-chain data remains weak, the path of least resistance appears to be downward.
