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Here’s why ADA’s 23% rally could call for caution!
As the crypto market continues to see significant price fluctuations, investors are left questioning what is driving Cardano’s recent surge. At press time, the altcoin has posted a 3.52% gain in the past 24 hours, with its seven-day return over 23%. While this impressive rally may be appealing to some, it may not necessarily be sustainable.
According to recent data from on-chain signals and equal liquidations, there are signs that ADA could soon enter a distribution phase. This means that investors, who have seen significant profits, are beginning to lock in their gains by selling their assets. This development could lead to a downward correction, potentially revisiting the $3 mark.
One of the key indicators supporting this notion is the Net Unrealized Profit and Loss (NUPL) metric. Historically, when holders start showing profitability, it often precedes a decline as investors look to lock in gains, ultimately leading to a downtrend.
Additionally, Alphractal’s Joao Wedson has echoed this sentiment by citing a short-term cooling period before ADA possibly rallies past $3 or even reach $4.90 in October or November.
Interestingly, activity has been observed across Cardano’s decentralized finance (DeFi) space and centralized exchanges, hinting that the market is preparing for a new phase. In DeFi, ADA’s Total Value Locked (TVL) has surged by 3.44% over the past 24 hours, indicating that investors are looking to earn passive income from their assets even as the asset enters a distribution phase.
In addition, investor sentiment remains unclear in the spot market, with approximately $280,000 worth of ADA exiting exchanges within the same timeframe. This marks the first significant outflow after days of steady accumulation.
Source: ambcrypto.com
