Cardano (ADA) Shows Signs of Bullish Momentum as On-chain Metrics Point to Growing Trader Confidence

Cardanos (ADA) is showing signs of bullish momentum this week as on-chain metrics point to growing trader confidence in the eighth-largest cryptocurrency by market capitalization.

Cardano (ADA) is showing signs of bullish momentum as on-chain metrics point to growing trader confidence in the eighth-largest cryptocurrency by market capitalization.

The digital asset is currently trading at around $0.74, having recovered more than 4% so far this week. This recovery comes after weeks of consolidation in a tight range between $0.69 and $0.75.

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Long-to-short ratio hits 1.15

Data from Coinglass shows that the long-to-short ratio for Cardano has reached 1.15, its highest level in over a month. A ratio above one means more traders are betting on price increases rather than decreases.

For instance, on Deribit, the Long-to-Short Ratio for Cardano reached 1.15, its highest point since June 16, indicating strong bullish sentiment among derivatives traders.

This ratio measures the number of traders who are opening positions in anticipation of a price increase (long positions) compared to those who are betting on a price decrease (short positions).

At the same time, the total market capitalization of stablecoins on the Cardano network reached an all-time high of $30.77 million, according to DefiLlama.

This surge in stablecoin activity showcases the increasing utility and adoption of Decentralized Finance (DeFi) applications on the Cardano blockchain. More users are turning to Cardano-based financial tools, which could boost demand for the native ADA token.

Technical analysis

From a technical perspective, Cardano is approaching a key resistance level. The cryptocurrency faced rejection around its 50-day Exponential Moving Average (EMA) of $0.77 on Wednesday, resulting in a 2.16% decline.

If ADA breaks above this resistance and manages to sustain a daily closing price above it, the price could experience a 13% rally to test the next resistance at $0.83.

The Relative Strength Index (RSI) on the daily chart stands at 49 and is gradually moving toward the neutral level of 50, which suggests a decline in bearish momentum observed in recent trading sessions.

Furthermore, the Moving Average Convergence Divergence (MACD) indicator on the daily chart displayed a bullish crossover on Tuesday, a technical signal that usually indicates the beginning of an upward trend.

On-chain data from Coinglass reveals that exchanges saw an outflow of $13.75 million worth of ADA tokens in the past 24 hours. Such outflows typically indicate that investors are transferring tokens to private wallets for long-term holding rather than selling.

These exchange outflows can reduce selling pressure in the market and potentially trigger a rise in price as the supply available for immediate trading decreases.

However, traders should exercise caution despite these positive signals. Data from Santiment shows a spike in the Age Consumed metric, indicating movement from previously dormant wallets.

This activation of dormant tokens could lead to increased selling pressure if long-term holders decide to take profits at current price levels.

Lower timeframes show some analysts identifying an ascending triangle pattern forming on the 4-hour chart. This pattern, bounded by horizontal resistance at $0.775 and a rising trendline below, is known to precede breakout movements.

A successful breakout above the pattern could accelerate buying pressure and push Cardano’s price up by 15% to challenge resistance at $0.90, with a potential further rise toward the $1 mark.

The Bollinger Bands indicator on the 12-hour timeframe appears to be squeezing, which typically signals an impending increase in volatility. This could result in a strong price move in either direction once the consolidation phase ends.

Trading volume for ADA has dropped by 18% in the past 24 hours, suggesting some hesitation among market participants ahead of a potential breakout. Lower volume during consolidation is common before major price movements.

For now, Cardano remains in a decisive phase, with technical indicators and on-chain metrics suggesting building momentum for a potential upward move if key resistance levels can be overcome.