Cardano’s ADA cryptocurrency experienced a 7.75% decline in the past 24 hours, bringing its price down to $0.55 on December 13. Several factors are contributing to this recent price drop.
From a technical standpoint, ADA’s price correction began on October 9, when it reached its 18-month high of $0.64.
Traders started to take profits as Cardano’s relative strength index (RSI) on shorter timeframes entered “overbought” territory by crossing the 70 threshold.
An RSI reading above 70 suggests that an asset is becoming overvalued and may be due for a trend reversal or corrective pullback.
ADA is currently undergoing a correction pullback, characterized by its limited and range-bound movement within a triangular structure.
This phase reflects market indecision, with neither the bulls (buyers) nor the bears (sellers) firmly in control.
Interestingly, the price drop on December 13 coincides with a slight decrease in the ADA supply held by addresses containing over 1 million units.
These large holders have seen their control over the ADA supply rise from 21.62 billion to 21.66 billion tokens in December.
This suggests that these whales have likely influenced ADA’s short-term price trends.
The broader cryptocurrency market is also undergoing a correction phase after reaching overbought levels, and ADA appears to be following a similar pattern.
Traders may have been influenced by recent U.S. consumer price index (CPI) data, which showed a drop in headline inflation to 3.1% year-over-year while core CPI remained unchanged at 4%.
However, month-over-month figures saw a slight uptick, with headline and core CPI at 0.1% and 0.3%, respectively.
This data implies that the Federal Reserve may remain cautious about cutting interest rates in the near future, potentially strengthening the U.S. dollar and putting pressure on cryptocurrencies like Cardano.
On a more positive note, Cardano’s four-hour chart shows a pennant structure, suggesting the potential for a bullish continuation.
Bull pennants typically form during uptrends and often lead to price increases once they break above their upper trendline, potentially reaching heights similar to the previous uptrend.
If ADA breaks out of its bullish pennant to the upside, it could target a price of $0.81 by year’s end, representing a 40% upside over the next two weeks.
Additionally, ADA’s 50-4H exponential moving average (50-4H EMA) near $0.528 could act as support and contribute to a rebound towards $0.81.
Conversely, a decisive break below $0.528 might push the price down toward the 200-4H EMA near $0.42, signaling a bearish scenario.