Cardano’s native token ADA ignored a serious price crash warning to rally to a new all-time high.
The ADA/USD exchange rate reached $2.56 for the first time on Aug. 20, following a 154.54% price boom that started on July 20. In doing so, the pair also ignored veteran trader Peter Brandt’s 60-90% price crash warning, which was based on a classic bearish pattern called the Head and Shoulders.
I remember being scoffed at unmercifully when I identified this top in $LTCUSD back in mid 2018
— Peter Brandt (@PeterLBrandt) July 30, 2021
But a flurry of bullish fundamentals assisted Cardano to ignore bearish technical setups.
At first, ADA/USD’s upside rally in the early days appeared largely in the wake of a similar boom across the cryptocurrency market, led by the euphoria surrounding its rival Ether’s (ETH) major software upgrade and fresh endorsements for Bitcoin from Tesla’s Elon Musk and Twitter’s Jack Dorsey.
ADA prices also tailed Bitcoin (BTC), the benchmark cryptocurrency that recently rallied above $48,000 for the first time. But the Cardano token started outperforming Bitcoin after Aug 17 as the latter turned choppy around the Federal Reserve’s tapering decision, as Cointelegraph covered here.
In detail, the ADA/USD exchange rate surged by up to 36.81% from its Aug. 18 low of $1.87 versus BTC/USD’s 7.91% rally in the same period.
Other top alternative cryptocurrencies, or altcoins, also posted better profits than Bitcoin, hinting that traders merely rotated capital out of the flagship crypto’s market on overvaluation risks.
Smart contracts FOMO
Traders’ bids for ADA also surged due to hype surrounding Cardano’s “Alonzo” upgrade by mid-September. The update expects to deploy smart contracts functionality onto the Cardano blockchain, a step that the project’s supporters say will make it a direct rival to Ethereum.
We’re on track to meet the projected HF dates for both testnet & mainnet #Alonzo upgrade, as Nigel outlined in last week update
— Input Output (@InputOutputHK) August 17, 2021
Smart contracts would enable Cardano to integrate more decentralized applications in its ecosystem, particularly decentralized finance (DeFi) platforms that enable automated borrowing, lending, and trading services.
Brandt’s bearish setup appears less likely to be realized by traders against Cardano’s bullish fundamentals.
The ADA/USD daily chart shows the pair in price discovery. Meanwhile, a Fibonacci retracement graph sketched from the swing high of $2.51 to the swing low of $1.05 spots ADA testing $2.51 as its interim resistance level.
A close above the said price ceiling puts ADA/USD en route to the next resistance line at 1.618 Fib line near $3.41.
Conversely, ADA’s daily relative strength indicator (RSI), now above 70, alerts about its interim overvaluation risks. As a result, ADA/USD can undergo a certain degree of correction to neutralized its overbought status, with the next support target sitting near 0.786 Fib line (at $2.20).