ADA token hits all-time high, creating more Cardano millionaires! Technical indicators predict short-term volatility ahead

The third-ranked cryptocurrency, Cardano, has surged more than 100% so far this quarter, hitting a new all-time high of $2.97 recently, sparking expectations that it will easily close above $3 in the coming trading sessions.

Cardano is planning to launch smart contract functionality on September 12, which will see the emergence of a whole new ecosystem of DeFi applications that is guaranteed to be unique compared to the applications we have already seen. This will create new revolutionary dApps and opportunities for early adopters.

The news has raised hopes that Cardano will compete directly with Ethereum, the largest smart contract platform, which has been struggling with network congestion and higher fees. As a result, demand for Cardano’s native asset, ADA, has been steadily growing.

Many analysts, including chart analyst PostyXBT, noted that the Cardano coin has entered a “price discovery mode.” Meanwhile, David Gokhshtein said that ADA’s bull run could continue until September 12, the day Cardano will integrate smart contract functionality into its blockchain via the “Alonzo” upgrade.

Specifically, the Alonzo upgrade introduces a native smart contract development language called Plutus to the Cardano ecosystem. Plutus is already available for testing and brings functional programming to smart contract creation for everyday users.

Therefore, ADA bulls expect the coin’s adoption to boom in the coming trading sessions as Cardano attracts decentralized application developers to its smart contract ecosystem.

Overbought Risk

However, Cardano’s technical indicators predict a short-term shock and despite maintaining the long-term bullish outlook, ADA could drop by as much as 40%.

The daily relative strength index (RSI) of the Cardano coin has moved deeper into the overbought zone, around 83. Traders consider RSI readings above 70 to be overvalued. Hence, it prompts them to sell the asset to ensure maximum profits.

For instance, the rise in the ADA/USD exchange rate in the first quarter of 2021 pushed its RSI reading above 90. Subsequently, the pair began to consolidate sideways while maintaining support near the 50-day exponential moving average.

Meanwhile, the oversold RSI suggests a medium-term profit-taking scenario. Therefore, if the trend in the first quarter of 2021 repeats, ADA’s next support line will be located near the 50-day moving average at $1.73, which is nearly 40% lower than the current price of $2.83.

When prices consolidate between upward sloping resistance and support trendlines, it is known as a rising wedge. Its appearance usually triggers a bearish reversal, which is confirmed by a sharp breakout below the lower trendline.

ADA currently meets all the criteria for forming a falling wedge pattern, as shown in the chart below. The pair now awaits a negative breakout below its wedge support trendline, which could prompt a correction towards the 50-4H exponential moving average near $2.45.

“Once the target area is reached, it will show whether Cardano is able to rebound from there or is simply setting itself up for further downside,” independent market analyst Vince Prince confirmed in another report based on the same rising wedge pattern.

ADA bulls are eyeing mass adoption

Crypto market analyst Lark Davis noted that if Cardano manages to reach the same market cap as Ethereum, the price of ADA will soar to $10 per token. But he cautioned that there are many more players waiting to replace Ethereum in the smart contract ecosystem.

“If it was just ETH vs Cardano this would be a much clearer battle of platforms,” Davis tweeted.

“But we also have BSC, Polygon, Solana, Terra, Avalanche, Zilliqa, Elrond, Polkadot, and many others looking for market share. Many of them are far ahead in ecosystem building.”

The analyst added that ADA could see a pullback after the launch of Cardano’s smart contracts. He advised potential ADA buyers to wait for a pullback.

Bitcoin Correlation

Another catalyst that seems to be playing a key role in driving ADA’s price higher is Bitcoin.

The benchmark cryptocurrency often acts as a trendsetter for rival digital assets. When it moves higher, most of the top altcoins follow suit; likewise, its decline triggers a sell-off across the crypto market.

Data provided by Crypto Watch shows that the one-year correlation coefficient between Bitcoin and Cardano is 0.40. This means that there is a 40% chance that BTC and ADA will move in the same direction.

The correlation coefficient between Bitcoin and Cardano over the 30-day period is 0.53. Meanwhile, the correlation coefficient over the past 24 hours is 0.60, indicating that the price of ADA is still influenced by the medium-term price trend of Bitcoin.

Bitcoin’s price has also seen gains in the third quarter, recently rising to a three-month high of $50,505 on the Coinbase exchange, and like Cardano, has begun to consolidate sideways near local tops.

But Dmitry Machikhin, CEO of Pressman Capital Investment Fund, noted that Cardano is forming a league of its own because it has a lower correlation with Bitcoin than other altcoins. Therefore, regardless of Bitcoin’s price trend, ADA is likely to continue climbing for the rest of 2021.

Cardano makes investors rich

The number of Cardano millionaires increased by 173% after the ADA price hit a new high.

The total number of Cardano wallets with a balance of more than $1 million surged from 3,625 on July 20 to 9,830 on August 24.

During the latest ADA price rally, Cardano addresses with balances exceeding $1 million surged by 173%.

Meanwhile, the total number of Cardano wallets holding at least $1 million in ADA tokens surged from 3,625 to 9,830 during the same period, according to data analysis platforms CoinMetrics and Messari.

Furthermore, the total number of Cardano millionaires surged 1,850% from 504 to 9,830, compared to ADA’s 1,455% year-to-date gain. Meanwhile, Google Trends searches for the keyword “Cardano” have seen erratic spikes, indicating retail interest.

The number of Cardano wallets holding more than $10 million worth of ADA tokens has climbed to nearly 1,000 from 504 on July 20. On January 1 of this year, there were only 86 wallets with a balance of more than $10 million.

What are the advantages of Cardano?

Cardano is unique not only in terms of speed and high decentralization, but also in its development environment. Most Ethereum alternatives, such as Binance Smart Chain and Polygon, are still based on the Ethereum Virtual Machine, which means they can run code that works on Ethereum without changes.

Ethereum and smart contracts based on EVM chains are written in a programming language called Solidity, which is similar to Javascript, another popular web development language. In the five or so years since Ethereum and Solidity were released, it has accumulated a large developer community, and there are now countless tutorials, videos, and workshops to help developers get started with the language.

On the other hand, Cardano will not be compatible with the EVM right away. There are plans to add this support in the future, but it may take years to implement. Instead, developers will have to write smart contracts using Plutus, a new and easy-to-program smart contract language, and Haskell, a programming language that has been around since 1990 but has yet to be adopted by the mainstream. Since Plutus offers greater ease of development and built-in security verification methods, we should see fewer application exploits and hacks, reducing the negative news that reduces adoption.

The new Cardano ecosystem will give developers and users alike the opportunity to experience a whole new smart contract ecosystem, including new projects, tokens, and features.