Cardano price suffers a harsh reversal: is the rally over?

Cardano’s price experienced a sharp reversal after hitting $0.657, its highest level since March 30 and 138% above its year-to-date low.

Cardano (ADA) has entered a correction, falling 14% from its weekly high and was trading at $0.562 at press time. This decline mirrored the decline in other major cryptocurrencies. Bitcoin (BTC) fell to $86,000 after approaching $90,000. As many assets have been in a strong bull run in recent days, most of the major cryptocurrencies have followed a similar move, mainly due to profit-taking. In most bull runs, financial assets often experience pauses while investors book profits.

Cardano’s recent rally was driven by several factors. Cardano founder Charles Hoskinson hinted that he plans to be more active in US politics after Donald Trump wins the election.

Additionally, Cardano’s DeFi total value rose to $350 million, the highest level in more than seven months. This TVL may continue to grow, especially with the anticipated integration of BitcoinOS, which is expected to unlock $1.3 trillion in liquidity.

Cardano’s rise also coincided with an increase in open interest in futures, reaching a multi-month high. It remained above $500 million for three consecutive days for the first time since March.

Cardano price may suffer double-digit losses ADA price chart | Source: crypto.news

The daily chart shows that Cardano price formed an inverse head and shoulders pattern before the recent rise.

On the positive side, the cryptocurrency is close to forming a golden cross, a bullish signal that occurs when the 50-day and 200-day moving averages cross. This pattern will only occur if Cardano’s uptrend continues.

However, signs suggest that the rally may be losing momentum as the coin forms a bearish engulfment pattern, which occurs when a red candle completely engulfs the previous smaller bullish candle.

If a reversal occurs, Cardano could fall to the psychological level of $0.45, approximately 21% below its current price. This view will be invalidated if the price of ADA rises and turns this week’s high of $0.657 into a support level.