Cardano (ADA) price risks a decline amid the upcoming Ethereum Pectra upgrade as historical patterns indicate that network improvements on ETH have not always boded well for ADA. Pectra is going live today, May 7, and Cardano is defying the odds with an intraday gain of 2% at press time. However, will history rhyme and force ADA to plunge and possibly lose crucial support at $0.66? Let’s explore.
Why Cardano Price Faces Pressure from Ethereum’s Pectra
The Cardano vs. Ethereum battle for dominance has been ongoing for years, considering that the two are some of the oldest layer one networks in the crypto industry. This battle has often led to ADA facing bearish pressure whenever there are improvements on the Ethereum network to improve its scalability and usage.
For instance, Cardano price recorded its steepest correction in 2021 that began after the London upgrade that introduced a mechanism to burn part of transaction fees to make ETH more deflationary. In 2022, ADA also declined after the Ethereum Merge that transitioned the network from proof-of-work to proof-of-stake.
The most recent ETH upgrade happened early last year when Cardano faced a 65% decline after Dencun. If history rhymes and the upcoming Pectra upgrade fuels a decline for this ETH rival, the ADA price is at risk of a steep downtrend.
Looming Long Liquidations Put ADA at Risk
If Cardano will crash and lose critical support as history rhymes, the cluster of long liquidations that are around $0.66 will fuel an even steeper downtrend. The liquidation map shows that more than $5.4 million in long ADA positions will be closed if the price falls to this level, and this will trigger a spike in selling pressure.
Analyst Kamil reacted to this situation, stating that “ADA traders are playing with fire” as the high leverage on this altcoin will cause Cardano volatility as millions of positions are closed. Besides the high long leverage, another analyst also noted that a decline in whale activity and transactions will have a bearish effect on the Cardano price prediction. He said,
“Whales are stepping back and transaction has been down up to 83%. Still watching out for its momentum to get stable otherwise we will embrace weakening confidence from big players.”
These market conditions indicate that it is likely for the price of Cardano to face downward pressure in the coming weeks, and this will match the historical patterns whereby the altcoin dropped when the Pectra upgrade went live.
However, a spike in network activity may invalidate this bearish outlook towards the altcoin, as data from DeFiLlama reveals that the stablecoin market cap on the blockchain has reached an all-time high. This points to increased network usage that may bolster ADA’s utility.
Cardano Technical Analysis
The four-hour Cardano chart shows a mixed ADA technical outlook. The RSI has been rejected in its attempt to cross above 50, showing that the recent surge in buying pressure is waning, and this may cause a resumption of the downward trend depicted in the descending parallel channel.
However, Cardano price is teasing to break out from this channel, and the MACD has formed a buy signal after crossing above the signal line. A strong breakout from the bearish pattern will only occur if it makes a strong close above the resistance trendline, and the RSI also makes a higher high above 50.
To sum up, Cardano may be on the verge of a downward correction if history rhymes and the upcoming Pectra upgrade on Ethereum stirs a price decline. This bearish thesis will be invalid if ADA can make a decisive close from a descending trendline, as this will confirm that the trend is about to shift from a negative one to a sustained uptrend.
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