Cardano price eyes $3, but ADA chart fractal hints at a potential 40% correction

Cardano price eyes $3, but ADA chart fractal hints at a potential 40% correction

Cardano blockchain's native asset ADA reached a new record high on Aug. 23 as investors pinned hopes on an upcoming smart contracts feature that expects to boost the cryptocurrency's adoption.

The ADA/USD exchange rate topped out at $2.899 around 09:00 UTC, raising anticipations that it would easily close above $3 in the coming sessions.

Many analysts, including pseudonymous chartist PostXBT, noted that the Cardano token had entered a "price discovery mode." Meanwhile, David Gokhshtein hinted that ADA/USD might continue its bull run until Sep. 12, the day Cardano would integrate smart contracts feature to its blockchain via a so-called "Alonzo" upgrade.

$ADA is just a monster right now. I’m trying to figure out it’s price before 9/12/2021.— David Gokhshtein (@davidgokhshtein) August 23, 2021

In detail, Alonzo upgrade introduces a native smart contract development language called Plutus to the Cardano ecosystem. Plutus is already available for testing and brings functional programming to smart contract creation to everyday users.

As a result, ADA bulls anticipate the token's adoption to boom in the sessions ahead as Cardano attracts dapp developers—operating in the emerging decentralized finance (DeFi) and non-fungible tokens (NFT) sector—to its smart contracts ecosystem.

Overbought risks

But Cardano's technical indicators predict a short-term shock, something that might have the ADA/USD corrected lower by as much as 40% despite maintaining its long-term bullish outlook.

The Cardano token's daily relative strength index (RSI) has ventured deeper into its overbought territory, at around 83. Traders consider an RSI reading above 70 as overvalued. As a result, it prompts them to sell the asset to secure maximum profits.

For instance, a run-up in ADA/USD rates in the first quarter of 2021 pushed its RSI reading above 90. Later, the pair started consolidating sideways while maintaining support near its 50-day exponential moving average (50-day EMA; the scarlet wave).

ADA price now sits atop 114% month-to-date and 1,511% year-to-date profits. At the same time, an oversold RSI pictures an interim profit-taking scenario. So if the Q1/2021 fractal repeats, ADA's next line of support comes to be near its 50-day EMA at $1.73, almost 40% below the current prices of $2.83.

$ADA Alonzo fork is in less than 3 weeks. Allegedly 100+ launches coming And a major Summit My first targets are going to be above $3 for TP1 I don’t know how high this goes in price discovery so will just play it as we go. Exciting weeks ahead https://t.co/47tnpZS3Rw pic.twitter.com/0ZRUZrMcpy— Pentoshi Wont DM You (@Pentosh1) August 19, 2021

But a correction does not necessarily exhaust Cardano's long-term bullish outlook. Given the potential success of its Alonzo upgrade, the project could end up attracting more speculative upside bids for its ADA token. As a result, the ADA/USD exchange rate expects to remain in a price discovery mode.

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