Cardano, the 22nd-largest cryptocurrency with a reported market cap of $5.49 billion is facing a tough time in the market. ADA – Cardano’s native token – has slid almost 74 percent over the past year, as it trades at just above $0.14 as of Thursday. While the digital asset is now starting to show bullish signs, analysts warn that it may just be a bull trap.
Analyst cautions against Cardano bull trap
In an X post on Thursday, seasoned crypto analyst Ali Martinez highlighted that despite the recent security breach of Cardano-based wallet called SecondFi – which resulted in a loss of $20 million in funds – the cryptocurrency is flashing a TD Sequential buy signal.
For the uninitiated, a TD Sequential buy signal is a technical indicator developed by Tom DeMark, that aims to identify when a downtrend may be getting closer to exhaustion. It appears after a specific sequence of declining price closes, and suggests that selling pressure could be weakening, increasing the likelihood of a short-term price rebound.
While the signal suggests a near-term bounce, the wider market is indicating caution, especially with Bitcoin slumping below the key $60,000 support level. According to Martinez, the localized push shown by ADA may lure in buyers via a so-called bull trap, before hitting a resistance and continuing lower.
To explain, a bull trap occurs when an asset appears to break higher or shows a bullish reversal – attracting buyers, before quickly reversing lower. This false move traps bullish traders in losing positions as the downtrend resumes and prices continue falling.
The analyst added that the immediate relief-rally is likely to stall between $0.16 and $0.176. Failure to break past these levels could set the stage for further downward movement for the cryptocurrency.
Cardano community shaken
Poor token price performance isn’t the only issue facing the Cardano community. The low investor interest in the ecosystem forced Cardano analytics platform Taptools to shutter its business on June 3.
On June 4, Cardano founder Charles Hoskinson announced that he is taking a temporary break, and that bigger challenges could be in store for the community in the months ahead. Despite the string of bearish developments, some positive on-chain moves show that ADA could be on the precipice of a bullish trend.
