Cardano’s Rising Trade Volume May Trigger Price Drop
Cardano’s Rising Volume: A Double-Edged Sword?
Cardano (ADA) is one of the most well-known cryptocurrencies on the market. However, despite its popularity, the increasing trading volume of the currency could be its downfall. How so?
Rising Volume, Falling Price
Between January 22 and 23, the trading volume of Cardano rose from 234 million to 453 million. This means that there were many transactions with the token. However, an increase in volume is not always good news for the price of a cryptocurrency.
If the price rises and the trading volume follows, it could signal buyer interest and serve as strength for an upward price movement. However, rising volume with a falling price has the opposite effect. In the case of ADA, a further increase in volume while the price falls could lead to further downward movement.
Bears in Advantage
Technically speaking, the 20-day EMA (Exponential Moving Average) has been above the 9-day EMA, which is seen as a bearish sign. In addition, the ADA price has fallen below both EMAs, indicating that a short-term recovery is unlikely.
The Chaikin Money Flow (CMF) also showed a similar trend, as it fell to -0.07. This negative value indicates strong selling pressure. If the bulls don’t reverse the trend soon, ADA could fall to $0.40.
No Escape from Downward Pressure in Sight
Regarding the Open Interest (OI), the number of outstanding futures contracts for a cryptocurrency, Coinglass shows a decline to $231.61 million. An increase in OI means that market participants are increasing their net positions. However, a decrease in OI indicates decreasing liquidity and increased closing of positions.
In terms of price movement, the OI suggests that ADA could continue to fall as speculation around the token decreases.
What Does This Mean for ADA Investors?
If the status does not change, there is a high probability that ADA will fall below the key support of $0.45. At the same time, traders should be on the lookout for a possible reversal after the potential decline.
If ADA falls below $0.40, this could represent a good entry point before the next uptrend. But as always, investments in cryptocurrencies come with high risk and should be made with caution.