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The Alonzo update did little to save Cardano from sliding along with the rest of the cryptocurrency market, despite the fact that bullish technical factors remain.
Despite the completion of its hard fork upgrade dubbed “Alonzo,” which included smart contract capability, the price of Cardano (ADA) plummeted on Monday in line with the other leading cryptocurrencies.
The ADA/USD exchange rate fell 10.67 percent to an intraday low of $2.30, owing in part to profit-taking by speculators following the pair’s 1,200 percent-plus price surge this year. Additionally, the intraday sell-off also surfaced in the period of an overall crypto market decline, with top tokens Bitcoin (BTC) and Ether (ETH) falling 4% and 6.97%, respectively.
Cardano’s decrease occurred after its core foundation for the first time implemented a long-awaited smart contracts functionality on its public blockchain. The launch aims to get into the burgeoning decentralised finance (DeFi) and nonfungible token (NFT) sectors, which are grappling with slower and more expensive transaction fees on Ethereum, the main smart contracts platform.
As a result, anticipation for an extended upside boom in the ADA markets was high, with The Value Trend, a financial analyst at Seeking Alpha, expecting the Cardano native token to hit $10 should it flip Ethereum to become the leading smart contracts platform.
Overall, the belief helped ADA/USD deliver strong profits in the days approaching the Alonzo upgrade. On July 20, the pair was trading for as low as $1. Later, on Sept. 2, its value rose to a record high of $3.16, a 200% rebound.
Bullish continuation signals persist
Following a strong upward run, bullish assets tend to consolidate sideways or down as traders seek to lock in their profits. Simultaneously, long-term enthusiastic investors buy the asset from weak hands in order to build long-term investment schemes.
Following ADA’s tremendous 200 percent-plus bull run, the Cardano chart below implies a similar consolidation phase. As a result, the chances of the ADA/USD exchange rate continuing on its upward trend are high.
The rectangle pattern appears like a bull flag. And, as a general rule, the profit target for bulls in a bull flag scenario is the same as the length of the previous uptrend.
A break over the upper bull flag trendline (at $2.93) might send ADA/USD to $4.50.
Furthermore, the Cardano token would need to preserve its foothold above its 50-day exponential moving average (50-day EMA; the velvet wave) near $2.27 in order to maintain its interim bullish bias. A break below the bull flag support and 50-day EMA floor might send ADA back to $1.92, its mid-August support line.
Analysts provided more specific price estimates, with a pseudonymous Twitterati recognising a “Double Bottom” situation and noting that traders are selling the news.
#Cardano smart contract upgrade so far going as I have predicted: Sell the news.
The price also formed a double top and now forming a lower low. If $2.25 is breached then down we go even more.
$1.20 soon? pic.twitter.com/riFirqmCgz
— Rautakansleri (@rautakansleri_) September 13, 2021
Cerbul, another market analyst, said ADA’s ongoing plunge was not due to the “sell the news” sentiment, adding that more capital would flow into the Cardano ecosystem from the DeFi sector.
“Accumulate,” he said.