Will Cardano’s DeFi Announcement Drive Strength in ADA?

Posted Friday, May 28, 2021 by
Aiswarya Gopan • 2 min read

Cardano appears to be posting a recovery during early trading on Friday after the recent dip below the key $1 level as the company behind the network – IOHK, gets ready for the release of the Alonzo testnet starting in June. At the time of writing, ADA/USD is trading around $1.56.

Prior to the crypto market crash last week, Cardano had risen to an ATH around the $2.50 level and was holding steady during mid-May. However, the mayhem caused after China’s crypto mining ban followed by Tesla CEO’s comments about Bitcoin took down not only the market leader but had a corresponding impact on almost all other cryptocurrencies, including ADA.

Things are looking up for Cardano, however, on the fundamentals front as IOHK gets ready to roll out smart contract capabilities on its blockchain network. This important feature will help the network ready itself to support the ever-expanding DeFi ecosystem.

The Marlowe suite, as announced by the company, is due for launch soon and will feature products catered to support DeFi projects as it can facilitate P2P financial agreements. The rollout of Alonzo hard fork and then Plutus smart contract development and support will make Cardano a more attractive alternative to Ethereum, which has been facing issues related to congestion and high gas fees lately.

Key Levels to Watch

Despite the recovery past the $1 level, technical analysis of the 4-hour price chart of ADA/USD reveals a bearish bias among moving averages as well as leading indicators, MACD and momentum. The price sits just above the pivot at $1.53, and moves in the immediate term will be dicated by whether it can continue to hold and rise far away from this level.

If the level holds and buying action builds up, we could see bullish momentum strengthen and take ADA’s price all the way above the $2 level where it could encounter some resistance. On the other hand, if the bearish pressure builds up, we could see the price crashing all the way back down to $1 in the near-term.