Cardano ( ADA ) declined on July 21 amid increasing selling pressure around its fiercest resistance levels in 2022 due to the large planned hard fork.
ADA price could drop 20 percent by early August
ADA was down 5 percent on the day at $0.476. This drop came a day after the brief break above the 50-day EMA (red line on the chart) at $0.50.
The 50-day EMA has acted as resistance at ADA since October 2021.
Additionally, resistance at the upper trendline of a broader descending channel reinforced selling sentiment around the 50-day EMA. In early June, the same set of resistances triggered a 35 percent decline in price toward the channel's lower trendline.
Therefore, there is a risk that another correction in ADA could take the price down towards $0.384 by July or early August. That would represent a drop of about 20 percent from the July 21 price.
2018 fractal: ADA rate at $0.20
However, one analysis suggests ADA could drop even lower than $0.384.
A bearish ADA forecast from TradingShot compares the ongoing correction to a 2018 correction as seen in the chart below.
In the 2018 chart above, ADA has been undergoing multiple declines near its 50-day EMA (orange line) while continuing to trend lower in a descending channel. The token’s downtrend ended after a nearly 93 percent correction from its local peak.
"Looking at the 1D RSI, we appear to be on the third (3) and final leg below the dip," said TradingShot . In addition it said:
“So, if ADA owners want to avoid that, price needs to break out of the 1D MA50 and hold above it for at least a week or there could be a 93% drop to $0.200.”
When is the hard fork coming?
This latest ADA correction comes just days before the Cardano hard fork.
The hard fork called " Vasil " was supposed to take place in June, but was postponed to the last week of July due to several bugs . Still, as of July 21, Input Output Hong Kong (IOHK), the company behind the Cardano blockchain, has yet to announce an exact date for the hard fork.
Vasil is expected to bring significant performance improvements to the Cardano blockchain. These include faster block generation and higher transaction speeds. The upgrade could boost ADA adoption due to improved network efficiency.
But Cardano has historically seen sharp corrections following most network upgrades. This is due to the " buy the rumor, sell the news " principle that has become established in the market.
In the Alonzo blockchain upgrade in September 2021, ADA has partially surged over 200 percent to a record high of 3.16 percent pre-launch. After the upgrade, however, Cardano fell by over 85 percent.
ADA is up just 25 percent after the token bottomed at $0.384 on May 10. This suggests that Vasil has moved the market little.
But not everyone is convinced. For example, analyst Lark Davis believes that if the token can hold the 50-day EMA as support, it will break out strongly after the hard fork.
Until then, ADA will likely continue to be under "sell the news" pressure. This is further compounded by the ongoing macroeconomic risks and their negative impact on the crypto markets.
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