Cardano Flashes Bullish Reversal Signal Amid Declining TVL and Stablecoin Supply

Source: CryptoNewsNet Original Title: Cardano price flashes bullish reversal signal while TVL, stablecoin supply drop Original Link:

Cardano Price Analysis: Bullish Reversal Pattern Emerging Amid Weakening Fundamentals

Overview

Cardano (ADA) has experienced significant price decline, dropping 25% from its December high and 63% from its October peak. The market cap has contracted from $35.1 billion to approximately $12.9 billion. However, technical indicators suggest a potential bullish reversal could be forming.

Deteriorating On-Chain Metrics

The network’s fundamentals have weakened considerably:

• Total Value Locked (TVL): Declined from an August high of $544 million to $215.5 million, indicating reduced user participation and potential loss of investor confidence in the network’s growth prospects.
• Stablecoin Market Cap: Dropped from a November high of $40.48 million to $37.68 million.
• Futures Open Interest: ADA Futures open interest decreased from $1.72 billion in October to $651 million, suggesting reduced leverage trading activity.

These deteriorating metrics have maintained cautious investor sentiment and fragile market conditions, weighing heavily on price performance.

Technical Analysis: Falling Wedge Pattern

Despite the weakness in on-chain statistics, the daily chart presents a bullish outlook:

Pattern Formation: Cardano has been forming a falling wedge pattern since early October, characterized by two converging descending trendlines.

Historical Significance: Historically, when an asset breaks out of a falling wedge from the upper side, it typically signals that the ongoing downtrend has lost momentum.

Momentum Indicators: The RSI has formed a bullish divergence, indicating a potential rebound could be developing.

Key Price Levels

Bullish Scenario:

• Breakout threshold: 20-day SMA at $0.39
• If this level is breached, it would confirm the wedge breakout
• Potential upside target: $0.51 (calculated by adding the wedge height to the breakout price)
• This represents approximately a 45% rally from current levels

Bearish Scenario:

• Breakdown below the lower trendline could lead to a drop to $0.30
• This level has acted as strong support throughout the previous year

Conclusion

Traders should closely monitor the 20-day SMA at $0.39 as the key decision point for confirming whether the bullish reversal pattern will materialize. A confirmed breakout could potentially trigger the anticipated 45% rally, while a breakdown would suggest further downside pressure.