- Rising volume on ADA could further depress the price.
- Open Interest fell, suggesting that ADA could fall to a low of $0.40.
Cardanos [ADA] The drop to $0.45 has been accompanied by an increase in volume, AMBCrypto discovered. Between January 22 and 23, Cardano volume increased from 234 million to 453 million.
This means that there have been many transactions with the token.
But an increase in volume is not always good news for the price of a cryptocurrency. When the price rises and trading volume follows, the trend may change signal a strong interest in buyers.
This could also serve as a force for upward price action.
However, increasing volume at a decreasing price does the opposite. In the case of ADA, if volume continues to rise alongside a price drop, the trend could lead to a further decline.
Source: Santiment
‘Tis the season for the bears to shine
According to the technical outlook, the 20-day EMA (yellow) had moved above the 9-day EMA (blue). This trend is considered bearish.
Furthermore, ADA’s price had fallen below both EMAs, indicating that a near-term recovery may not be an option.
The Chaikin Money Flow (CMF) also showed a similar indication, falling to -0.07.
This negative reading suggests that selling pressure was strong, and if the bulls don’t curtail the momentum soon, the ADA could fall to $0.40.
As for the Aroon indicator, the 4-hour chart showed that the Aroon Up (orange) was 14.29%. The Aroon Down (blue), on the other hand, was 100%.
This disparity was a testament to the bearish momentum the native Cardano token was facing.
The Relative Strength Index (RSI) had fallen to 24.16, indicating that the ADA was overbought. Although the price could continue to fall, the RSI reading showed that a recovery could be close. But it depends.
Source: TradingView
If more capital flows into the Cardano market, ADA could have a chance at recovery. However, a lack of liquidity could send things in the opposite direction.
So, traders may need to watch out for the dynamics of the coming days.
There is no way out of the mess yet
In terms of the Open Interest (OI), Coinglass showed that it dropped to $231.61 million. OI is the number of outstanding futures contracts related to a cryptocurrency.
When it increases, it means market participants are increasing their net positioning.
However, a decrease in OI indicates decreasing liquidity and increasing closing of positions. In light of the price action, the OI indicates that ADA could continue to dump.
This was because speculation surrounding the token decreased.
Source: Coinglass
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If the status does not change, there is a good chance that the ADA will fall below $0.45, which is important support. At the same time, traders should be alert to a possible reversal after the possible decline.
Should ADA fall below $0.40, this could be a good entry into the next uptrend.