- Cardano has pulled back after failing to break above its 50DMA near the $0.50 level.
- As the date for the blockchain’s major Vasil upgrade approaches, traders are wondering whether this could boost ADA’s price.
- A break above $0.50 could open the door to a swift rally towards $0.55 resistance.
Cardano Unable to Break Above 50DMA or $0.50 Level
The native token to the Cardano blockchain ADA has pulled back just over 2.0% on Tuesday after failing to break above its 50-Day Moving Average near the $0.50 level. Still, since breaking to the north of a downtrend that has been capping the price action for ADA/USD since mid-June on Monday, the cryptocurrency’s near-term technical outlook continues to look upbeat. The cryptocurrency still trades in the green by over 7.0% on the week.
A retest of the downtrend that had previously been acting as resistance, but has now turned into support, may prompt investors to reinitiate Cardano long positions. This could help ADA bounce back to retest the $0.50 level and its 50DMA. Of course, ADA is at the mercy of broader cryptocurrency market sentiment. And most other major cryptocurrencies have also pulled lower on Tuesday, though, like ADA, most still trade with gains on the week.
Bitcoin was last trading around $21,800, down just under 3.0% on the day. Ethereum was last trading down a little over 4.0% on the day just above $1,500. But Ethereum bulls remain confident that the cryptocurrency is soon going to test resistance in the $1,700 area.
Analysts have said that the latest Ethereum rally that has seen it rally about 50% from last week’s lows just above $1,000 has been catalyzed in part by optimism about the upcoming Ethereum Merge from Proof-of-Work to Proof-of-Stake. Some have argued that this optimism towards Ethereum is a negative for Cardano, which is a competitor of smart-contract-enabled blockchain. But it seems likely that if Ethereum does regain bullish momentum and hit $1,700, this should help give a broad boost to crypto risk appetite that could help lift Cardano too.
Vasil Hardfork Nears
By the end of this month, Cardano’s developers are expected to have implemented the much-anticipated Vasil hardfork. Cardano’s developers say that the upcoming upgrade is the most complex program of development and integration on Cardano since its Alonzo hardfork added smart contract functionality to the blockchain back in September 2021.
The Vasil hardfork aims to improve the network’s speed and scalability by reducing transaction size and, as a result, increasing the network’s throughput whilst also lowering transaction fees on the network. The upgrade was initially scheduled to take place at the end of June, but was delayed by Cardano’s developer Input Output Hong Kong (IOHK) out of an “abundance of caution” given the presence of a few minor bugs.
Where Next For ADA if it Breaks Above $0.50
Just as Ethereum has been benefitting from optimism about an upgrade to its network in recent sessions, there is every possibility that Cardano could as well. According to a survey conducted by finder.com last week, 50% of a panel of 53 fintech experts said they expect the Vasil upgrade to increase the functionality and use cases of the Cardano blockchain. Traders may soon begin to take the same view and bid up ADA’s price.
Moreover, on many metrics, Cardano’s blockchain is better than Ethereum. Gas fees on the former’s blockchain are typically around 0.16-0.17 ADA (currently around 8 cents). Gas fees on the Ethereum network are currently at their lowest since 2020 and in single digits (in US dollars), but can spike during times of major network congestion. Cardano’s network is also widely viewed as faster and more scalable than Ethereum’s.
If Cardano is able to break above the key $0.50 resistance area in the coming sessions, that opens the door to a swift test of resistance in the $0.55 area. If it was to break above that level, it could then rally back to the late-May highs in the $0.69 area. The next bullish target would be the February/April 2022 lows around $0.75.
ADA Still at Risk of Fresh Annual Lows?
Despite rising in recent days in tandem with a broad crypto rally, Cardano is still teetering only about 20% above earlier annual lows at the key $0.39 resistance level. In the crypto world, that is not very much. Meanwhile, the cryptocurrency is still trading nearly 85% below the record highs it hit above $3.0 last year.
Support around $0.40 has been steadfast in recent weeks. But if ADA/USD was to lose momentum and fall under $0.39, things could get very ugly very quickly. Below $0.39, there aren’t really any significant levels of resistance until all the way below $0.20. That would imply a decline of at least a further 60% from current levels.