Cardano (ADA) has surged 23% in the past week, but on-chain signals and equal liquidations hint at a possible distribution phase ahead. This raises questions about whether ADA will revisit its $3 target or get stuck below.
The altcoin’s recent rally has pushed it into high-profit territory, but this may not be all good news. Market indicators suggest that ADA could soon become overbought, prompting investors to adjust their positions accordingly. This aligns with AMBCrypto’s forecast for the altcoin.
Historically, profitability often precedes a decline as investors move to lock in gains, triggering a downtrend. With ADA climbing, signs of a distribution phase have started to emerge. Alphractal’s Joao Wedson has warned of a short-term cooling period before ADA possibly rallies past $3 by October or November.
The decentralized finance (DeFi) space has seen significant activity, with Cardano’s Total Value Locked (TVL) surging 3.44% over the past 24 hours. This could indicate that long-term investors are looking to earn passive income from ADA even as the asset enters a distribution phase.
In contrast, investor sentiment in the spot market is clear: ADA is being sold. $280,000 worth of ADA had exited exchanges in the past 24 hours, marking the first significant outflow after days of steady accumulation.
The derivatives market shows mixed sentiment, although buyers still have a slight advantage. Liquidation data on Coinalyze showed nearly equal volumes for long and short positions in the perpetual market. However, recent buyer volume accounted for 76.22% of trades, suggesting bullish sentiment may still dominate.
Despite this, the risk of selling pressure intensifying and triggering losses remains. As Cardano’s rally continues, investors should exercise caution and monitor on-chain signals closely to gauge the asset’s potential trajectory.
Source: https://ambcrypto.com/cardano-heres-why-adas-23-rally-could-call-for-caution