After a critical upgrade in mid-July, Cardano is about to become a full-fledged smart contracts platform. Project founder Charles Hoskinson confirmed that he recently processed sales of non-fungible tokens worth more than $ 10 million on his public ledger.
Additionally, SundaeSwap, the first DeFi DEX to use Cardano smart contracts, is expected to hit the market shortly, and many ADA investors are interpreting this as a potential bullish catalyst for the altcoin.
But the growth of the Ethereum rival as a project could not lead to higher adoption of its native cryptocurrency ADA, at least according to an analysis by Peter Brandt, the CEO of the global trading company Factor LLC.
A 60-90% crash ahead?
The veteran analyst announced a declining setup for ADA in a tweet published on Friday. He cited a classic tech pattern known as Head and Shoulders to predict a bearish scenario for the Cardano token, which is up more than 600% year-to-date.
In detail, Head and Shoulders is formed when price makes three consecutive spikes at a single support level, with the condition that the middle spike is higher than the other two, which are usually the same level. The price eventually breaks below the support levels – also called the neckline – and drops the maximum amount between the top of the middle spike and the support level.
ADA visibly fits the description, as shown in the graphic shared by Brandt.
The analyst envisioned the ADA / USD exchange rate falling as low as $ 0.12, a 90% decrease from the pair’s current bid near $ 1.26. A percentage calculation of the head and shoulders pattern marked the profit target near $ 0.35, 60% less than the clipping.
Brandt recalled his record predicting market spikes to bolster his depressed Cardano forecast. For example, one of his 2018 analyzes that involved Litecoin corrected a descending triangle setup after the altcoin rose from $ 4 to $ 420 during the 2017 Bull Run.
“I remember being mercilessly ridiculed when I identified this top in LTC / USD in mid-2018,” tweeted Brandt. “Hey Cardano trolls, aim.”
But can 2018 repeat itself?
The crash that followed the Bull Run 2017 was mainly due to the so-called Initial Coin Offering Bust. A study conducted by Statis Group found that more than 80% of blockchain startups that raised funds in Bitcoin, Ether and other top coins of the time failed to bring a working product to market.
In the meantime, it turned out that the majority of them were pure scams that sold the collected crypto capital and thus exerted downward pressure on the entire market. Litecoin, Bitcoin and Ether crashed more than 80% in 2018 as the ICO crowded out FUD investments.
In contrast, the 2020 bull run came as a result of macroeconomic errors. The Federal Reserve’s efforts to contain the economic fallout from the Covid-19 crisis resulted in an unprecedented quantitative easing program. As a result, near zero interest rates and the purchase of $ 120 billion worth of assets drove investors to look for better alternatives in riskier markets every month.
As a result, Bitcoin boomed from under $ 4,000 in March 2020 to over $ 65,000 in April 2021. Meanwhile, altcoins, which tend to follow Bitcoin trends, also soared. Cardanos ADA was one of them; it is now trading more than 7,000% higher from its mid-March low.
The 30-day correlation between Bitcoin and ADA is close to 0.85 above zero, according to data from Crypto Watch.
Related: Waiting For Alonzo: Cardano Smart Contracts Are Creeping Towards Full Go-to-Market
Simon Kim, CEO of crypto venture fund Hashed, told Cointelegraph in March that the 2020-2021 crypto market will be completely different from 2017-2018, noting that the market now runs on an entirely different basis. He said:
“First, different DeFi projects create value based on a clear business model. Second, we are seeing record-breaking active investments from institutional investors and, finally, various entrances and exits, including not only PayPal and Visa, but also large banks, are now emerging. “
Rekt Capital, a pseudonymous market analyst, noted that ADA needs to close above its weekly close of $ 1.30 to confirm its long-term uptrend. Cointelegraph’s Rakesh Upadhyay also indicated that a break above $ 1.33 would increase the Cardano token’s potential to extend its upside target towards $ 1.90.
“Conversely, if the price drops from current levels or from overhead resistance and falls below $ 1.20, it will indicate that the bears will continue to sell at any higher level. This could re-test the critical support at $ 1.” , Upadhyay warned, nevertheless.
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