Cardano (ADA) Price Prediction: MVRV Ratio Turns Negative, Long Positions Liquidation Surge, Can ADA Break Out of the Downtrend Channel

Gate news, despite the overall fluctuations in the crypto market, the price movement of Cardano (ADA) continues to point towards a downward trend within the falling channel, with bearish momentum remaining strong. Recently, on-chain data shows that the MVRV ratio of ADA has turned negative, indicating that a large number of investors are in a state of loss; meanwhile, long positions have surged in liquidation, and the open contracts of ADA have declined, further exacerbating the market's pessimistic sentiment. The bearish tendency in the technical outlook suggests that if the current momentum continues, ADA may face a larger pullback.

1. On-chain data reveals ADA is undervalued: MVRV ratio turns negative

Santiment's on-chain data shows that Cardano's weekly market value to real value (MVRV) ratio has dropped to a negative value of -12.27%. The MVRV ratio is an important indicator of the average profit and loss situation for investors. A negative ratio means that if all ADA tokens were sold, the average investor would incur a loss of about 12%.

It is worth noting that when the market value falls below the realized value, it usually indicates that the asset is undervalued. The current situation of Cardano is similar to what occurred in 2024 and during the 2022-23 period when ADA was also in an undervalued state. This indirectly reflects that, despite the price drop, the intrinsic value of ADA may not be fully reflected in the current market price.

2. Surge in Long Position Liquidations: Market Sentiment Turns Pessimistic

According to CoinGlass, the open interest (OI) for ADA is $712.27 million, which has decreased by 2.15% in the past 24 hours. The sharp drop in OI is usually related to a stagnation of funds due to position closings, indicating a reduction in trading activity.

As trading activity decreases, the OI-weighted financing rate for ADA has fallen from a peak of 0.0075% on Thursday to 0.0029%. The financing rate aims to balance swap and spot prices, and when the positive rate declines, it indicates that buying activity has cooled, and market sentiment is becoming cautious.

More concerning is that the liquidation data from the past 24 hours reflects a significant defeat for a large number of bullish traders. Bullish positions in ADA worth over 1 million dollars were wiped out, far exceeding the 180,000 dollars in bearish liquidations. The long-short ratio dropped to 0.9429, indicating a substantial increase in bearish positions, with bearish sentiment dominating the market.

3. Technical Analysis: ADA is trapped in a downtrend channel, key support level is facing a test

(Source: Trading View)

FXStreet analyst Vishal Dixit pointed out that Cardano failed to break through the 50-period Exponential Moving Average (EMA) on the 4-hour chart, leading to a pullback to $0.55. Although as of the time of writing, ADA has risen by 1% within four hours, driven by several lower shadow candlesticks, the overall price movement still forms a typical descending channel, which is a bearish trend continuation pattern.

Resistance trend line: composed of connecting the fluctuation highs of May 23 and June 11.

Support trendline: formed by connecting the bottom rebounds on May 19, June 5, and June 19.

If the closing price falls below the $0.55 level, it may continue to pullback to the weekly low of $0.52, followed by the psychological support level of $0.50. The Moving Average Convergence Divergence (MACD) indicator line crossing below its signal line also shows a sell signal, further confirming the bearish trend.

However, it is worth noting that as ADA rises from the newly formed base, the Relative Strength Index (RSI) is at 44, showing an upward trend, which may indicate certain rebound potential in the short term. If ADA can close above the 50-day EMA, it may push towards the upper channel and move along the 200-day EMA to $0.63.

Conclusion:

Cardano (ADA) is currently in a challenging period, with on-chain data indicating that it is undervalued, while the surge in long positions liquidation reflects a pessimistic market sentiment. Technical analysis also shows that ADA is trapped in a descending channel, with critical support levels at $0.55 and $0.50 facing severe tests. Although the rising trend in RSI may suggest a short-term rebound, the overall bearish momentum remains strong. Investors should closely monitor whether ADA can effectively break through the resistance of the descending channel and observe the performance of the key support levels to assess its future price movement. In the current market environment, taking a cautious wait-and-see approach and waiting for clear reversal signals is a more prudent strategy.