Cardano price may crash soon, legendary trader warns

Cardano price is down over 20% from its high point this year, and one legendary trader believes it is facing further downside.

Cardano (ADA), a popular tier-1 cryptocurrency, has fallen to $0.90, well below its year-to-date high of $1,326.

Legendary trader Peter Brandt, who writes extensively on technical analysis, warned that the cryptocurrency could continue to decline in the near term.

He pointed out Cardano’s head and shoulders chart pattern that forms on the daily and four-hour chart. An H&S formation consists of two shoulders at $1,153 and a head at $1,327. There is also a neckline at $0.914.

An H&S pattern usually leads to a strong downtrend. In most cases, the target of this refraction is usually the same as the distance between the head and neck line. Therefore, if Brandt is correct, it means Cardano price will decline to $0.629, which is a few points below the 61.8% Fibonacci Retracement level. This price is approximately 32% below the current level.

Cardano has weak fundamentals

Third-party data shows Cardano’s fundamentals are weak, which explains why it lags behind other layer 1 networks like Solana and Ethereum.

Data from DeFi Llama shows that Cardano’s total DeFi value locked has increased from $700 million in November to $478 million today. The decline was also evident in terms of ADA, with TVL falling from 670 million ADA, its year-to-date high, to 494 million.

Meanwhile, data from IntoTheBlock shows that the number of Cardano addresses continues to decline after peaking in November as the cryptocurrency rebounded. Cardano had almost 210,000 daily active addresses in November 2023, which dropped to 66,500.

Cardano daily active addresses | Source: IntoTheBlock

Cardano’s futures open interest is also trending downward, a sign that demand is falling in the futures market. Its interest rate fell from $1.1 billion to $775 million on Thursday, its highest level since the beginning of the year.

Open interest in futures is an important metric that looks at the volume of unfilled put and call option orders in the futures market. This figure often rises when there is significant demand for a coin.