Cardano price suffers a harsh reversal: is the rally over?

Cardano’s price experienced a sharp reversal after reaching $0.657, its highest level since March 30 and 138% above its year-to-date low.

Cardano (ADA) entered a correction, falling by 14% from its weekly high and was trading at $0.562 at press time.This decline mirrored the pullback in other major cryptocurrencies. After approaching $90,000, Bitcoin (BTC) retreated to $86,000. Most major coins followed a similar move, primarily due to profit-taking, as many assets have been in a strong bull run in recent days. In most bull runs, financial assets often experience a pause as investors book profits.

Cardano’s recent rally was driven by several factors. Charles Hoskinson, Cardano’s founder, hinted that he plans to become more active in U.S. policy now that Donald Trump has won the election.

Additionally, Cardano’s DeFi total value locked has climbed to $350 million, its highest level in over seven months. This TVL could continue to grow, especially with the anticipated integration of BitcoinOS, which is expected to unlock $1.3 trillion in liquidity.

Cardano’s surge also coincided with a rise in futures open interest, reaching its highest level in months. It has remained above $500 million for three consecutive days, the first time it has done so since March.

Cardano price could suffer double-digit losses

The daily chart indicates that Cardano’s price formed an inverse head and shoulders pattern before the recent rally.

On the positive side, the coin is close to forming a golden cross, a bullish signal that occurs when the 50-day and 200-day moving averages cross. This pattern will materialize only if Cardano’s uptrend continues.

However, signs suggest the rally may be losing steam as the coin forms a bearish engulfing pattern, which occurs when a red candle completely engulfs a preceding small bullish candle.

If a reversal takes place, Cardano may fall to the psychological level at $0.45, approximately 21% below its current price. This outlook will be invalidated if ADA’s price jumps and turns this week’s high of $0.657 into a support level.