Monday brought a return to fear, uncertainty and doubt for crypto bulls. And unsurprisingly Cardano (CCC:ADA-USD) wasn’t immune to the nightmare. But can the panic turn into tomorrow’s opportunity for ADA coin investors?
Let’s look at what’s happening at the so-called blockchain “Ethereum killer” and its ADA coin, then offer a risk-adjusted determination aligned with those findings.
FUD, Reddit and Kardashian, Among Other Things
“Fear, uncertainty and doubt.” Just when bulls had turned hog wild in almost everything crypto-related, along comes “FUD,” or an acronym for another phrase I can’t say in print. And ADA coin, despite gearing up for its “Alonzo” smart contract debut next week, proved easy prey for crypto’s no-longer-hibernating bear.
In less than seven weeks, Cardano’s ADA soared more than 200% to a record hit on Sept. 2. Sure, we’ve seen worse or rather, more aggressive bullish action in risk assets increasingly reactive to Reddit’s collective population.
Still, the selling in the Cardano coin wasn’t exactly undeserved.
Consider ADA’s market capitalization. At around $76 billion and with only Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) sporting higher valuations, that’s more than roughly 80% of the S&P 500! Boo! And besides, it is September, a historically bearish month for risk assets.
Still, if you’re in need of a bearish catalyst or two responsible for driving ADA bulls into a panic — you’re in luck.
Entering Monday, El Salvador was on the verge of becoming the first country to allow BTC as legal tender.
Further, tweets or intel gathered from a large Brazilian Reddit community of 3 million strong started a wave to buy $30 each of Bitcoin in a show of support.
But that’s all bullish, right? And I’m a monkey’s uncle. But there’s more vying to drag Cardano’s ADA down as well.
For one, there’s the Kardashian factor, which for some investors, has served as another bearish catalyst for ADA coin.
On Sept. 6 the chair of the U.K.’s Financial Conduct Authority was unfriended (okay, that was a joke) by the influential celebrity after warning her type of promotion of dubious cryptocurrency through social media was deceptive to investors.
Okay, so maybe the scam slam is a stretch. ADA may be an altcoin but that’s its only similarity to EthereumMax (CCC:EMAX-USD), which Kim apparently pitched to her throngs of followers on Instagram.
The thing is Cardano’s open-source, proof-of-stake blockchain has been gaining attention because of faster and less energy-intensive technology compared to its competition.
And whether that purpose is to guard against counterfeit retail goods, tracking produce from seed to stomach or for use within a burgeoning non-fungible token (NFT) market, that type of functionality is obviously important.
Cardano founder Charles Hoskinson, who might warrant more credibility than Kim, publicly warned of some FUD, the more typical kind, on the lead up to the Alonzo upgrade planned for Sept. 12.
As well, there’s been some bearish backlash from analysts following Cardano’s testnet launch. I suppose when it rains, it pours, which seems to be the case with ADA.
Cardano Weekly Price Chart
In a time when few of us are anything other than speculators in digital currencies and where innovative leadership is prone to challenge and being toppled, buying and selling ADA, or any crypto for that matter, should be done with active management around a core position.
This type of strategy is all the more relevant when looking at cryptocurrency market’s third largest coin. To be sure, ADA’s $76 billion in valuation is a vote of confidence. Importantly, there’s also significant downside risk if an overall bullish storyline falters.
Today and following this week’s out-the-gate plunge, a bear market cycle has begun. As the provided weekly view of Cardano’s ADA reveals, the coin is challenging a key, but volatile support zone from around $1.35-$2.00 comprised of Fibonacci, ADA’s prior 2018 high and trend support.
Ideally, long positions should have reasonably been trimmed into strength prior to Monday or as ADA’s weekly doji candle pattern failed while stochastics bearishly crossed in overbought territory.
Regarding a purchase to accumulate on weakness or as a starter position, ADA isn’t there yet. Thus far the coin has only begun its testing of technical zone support at Monday’s absolute low of $2.02. And stochastics, as mentioned, remains out of position.
For the time being and barring an ultra-quick price extension in the coin towards $1.35, Cardano’s ADA is simply a crypto to watch, until and if, a more fully-formed weekly bottoming candlestick backed by a more bullish-looking stochastics can emerge.
On the date of publication, Chris Tyler held LONG positions in Grayscale Bitcoin and Ethereum Trusts (GBTC, ETCG and ETHE). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.