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HomeAltcoins NewsCardano price targets $3, but ADA chart fractal suggests possible 40% correction

Cardano price targets $3, but ADA chart fractal suggests possible 40% correction

Cardano’s native blockchain asset ADA hit a new high on Monday as investors pinned their hopes on an upcoming smart contracts feature that it hopes to boost cryptocurrency adoption.

The ADA/USD exchange rate peaked at $2,89 around 9:00 am UTC, raising expectations that it would easily close above $3 in the coming sessions.

Many analysts, including chartist pseudonym PostyXBT, pointed out that the Cardano token had entered a “price discovery mode.” Meanwhile, David Gokhshtein hinted that ADA/USD could continue its bull run until September 12, the day Cardano will integrate a smart contracts feature to its blockchain via the “Alonzo” update.

In detail, the Alonzo update introduces a native smart contract development language called Plutus into the Cardano ecosystem. Plutus is now available for testing and offers functional programming for creating smart contracts for everyday users.

As a result, ADA bulls anticipate that token adoption will increase in the coming sessions as Cardano attracts decentralized application developers, operating in the emerging sectors of decentralized finance and non-fungible tokens, to its smart contract ecosystem.

Overbought risks

But Cardano technical indicators predict a short-term shock, something that could cause the ADA/USD to correct down by as much as 40% despite maintaining its long-term bullish outlook.

Cardano’s token’s daily Relative Strength Index (RSI) has moved further into overbought territory, around 83. Traders consider an RSI reading above 70 to be overvalued. As a result, he asks them to sell the asset to ensure maximum profits.

ADA/USD daily chart with RSI correction fractal. Source: TradingView

For example, an increase in ADA/USD rates in the first quarter of 2021 pushed its RSI reading above 90. Later, the pair began to consolidate sideways while holding support near its 50-day exponential moving average (EMA 50 days; the scarlet wave).

The ADA price is now above 114% of month-to-date earnings and 1.511% of year-to-date earnings. At the same time, an oversold RSI represents an interim profit-taking scenario. So if the Q1/2021 fractal repeats, the next ADA support line is approaching its 50-day EMA at $1.73, almost 40% below current prices of $2.83.

But a correction will not necessarily exhaust Cardano’s long-term bullish outlook. Given the potential success of its Alonzo upgrade, the project could end up attracting more speculative offers on the upside for its ADA token. As a result, the ADA/USD exchange rate expects to remain in price discovery mode.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trade move involves risk, you should do your own research when making a decision.

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