ADA shows modest upward movement that may dry up due to weak technical and macro factors.
The ThCardano (ADA) market has seen good news since August 31st, starting with a listing on Robinhood, the US retail investment platform, and ending with the release of its first lending and lending protocol, Aada Finance.
Additionally, Cardano developer IOHK stated that they are on the verge of achieving “three critical mass goals” that will lead to the launch of their long-awaited Vasil hard fork in September. Vasil aims to improve Cardano’s scalability and transaction throughput through pipelining.
The update could also improve decentralized application (DApp) and smart contract functionality by changing the Plutus script, the programming language used for smart contracts on the Cardano blockchain.
But the encouraging updates failed to attract sufficient buyers, as evidenced by ADA’s price action over the past 24 hours.
Bear Market Rally
On the daily chart, the price of ADA rose to an intraday high of $0.462 on Sept. 1, a day after rebounding from the session low of $0.424, and is up nearly 9%.
Related: New report ranks Cardano ahead of Bitcoin as world’s top intimate brands
However, this move has been accompanied by a drop in trading volume, suggesting traders are less confident in a sustained rally.
Daily ADA/USD price chart. Source: Trade View
A slight increase in ADA price also came after a sharp 28.5% decline, typically due to short coverage i.e. H. when traders buy back borrowed tokens to cover their open bearish position, briefly raising the spot price.
The resulting Cardano rally could be a bear market rally. This expectation stems from ADA’s exposure to macroeconomic risks, which has allowed ADA/USD to nearly keep pace with US equities.
ADA/USD and Nasdaq daily correlation coefficient. Source: Trade View
For example, on September 1st, the correlation coefficient between ADA and Nasdaq was 0.80.
Before the collapse of the descending triangle?
From a technical perspective, ADA has been plotting a descending triangle pattern on its daily chart since May 7th.
In detail, descending triangles appear when the price consolidates within a range defined by a falling upper trendline and a horizontal lower trendline. They are usually resolved after the price falls below the lower trendline and can usually drop to the maximum height of the triangle.
A 3 day ADA/USD price chart with a descending triangle breakout setup. Source: Trade View
ADA is now testing the lower trendline of its descending triangle for a possible breakout as shown below. The token will fall to $0.268 by September if the pattern plays out as above, or down 40% from current prices.
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