Cardano Is Approaching Some Must-Hold Thresholds Here

Cardano (CCC:ADA-USD) has been under pressure lately, but the struggle hasn’t been unique to just this cryptocurrency. In fact, many have struggled, including Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD).

However, those two continue to struggle after recent runs to all-time highs. They remain in the spotlight and just need a little momentum to send them back to new records. Cardano has not been as fortunate.

It is down about 60% from the highs set in early September and there’s been no bullish momentum around. Shares are down in five straight weeks, and in 12 of the past 15 weeks. More than halfway through December, Cardano is working on its fourth straight monthly decline.

So now the question must be asked, what do the technicals say?

The Must-Hold Level for Cardano

Source: Chart courtesy of TrendSpider

Cardano actually has two must-hold levels. In that context, one is more critical than the other, but they are both connected.

The first level is around $1.20, which has been short-term support all month. Cardano is forming a bit of a descending wedge here, characterized by a series of lower highs (essentially, a downtrend) and a static level of support, which we have at $1.20.

If Cardano loses $1.20 and fails to reclaim it, that opens the door down to a much more critical level — the real must-hold level — near $1.00.

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Some might say it’s no big deal for it to fall from $1.20 down to $1.00. That may be true, but for me, a near-20% dip in any assets is worth pointing out.

Should we see the $1 area, Cardano must hold this area as support. If it fails to do that, who knows where the bottom may be. It could be down at the newly established 200-week moving average or it could be slightly lower, like the prior resistance level near 38 cents.

Click to Enlarge

Source: Chart courtesy of TrendSpider

I’m not trying to be overly bearish or a fear monger, but I am simply following what the charts suggest.

On the upside, let’s see if Cardano can break out over downtrend resistance and the 10-day moving average. If it can do that, it could put $1.50 in play, along with the 50-day and potentially even the 200-day moving average.

To get there though, we’ll likely need to see a shift back toward “risk-on” assets, like growth stocks and cryptocurrencies.

Should You Buy the Dip?

The next question that inevitably pops up is whether investors buy the dip if Cardano rolls over.

Investors with higher risk tolerances will likely step in before the more conservative traders. Meaning, aggressive buyers will likely buy the dip to $1.00, while more conservative traders may wait for an even larger unraveling.

The risk to both groups is pretty clear.

Aggressive traders risk buying Cardano and suffering large losses. Conservative buyers risk waiting for a dip that never comes and missing out on the upside should Cardano rally.

Earlier in the quarter, Cardano was lagging its other peers. I wondered if it would be the next to hit new highs, but warned that a break below $2 could spell trouble.

Again though, it all circles back to the question of, “Should you buy the dip in the first place?”

One of the former Ethereum founders is behind Cardano, that being Charles Hoskinson. Like Ethereum 2.0, Cardano is a proof-of-stake cryptocurrency. According to Cardano the coin is “provably secure against bad actors and Sybil attacks.”

The way it works is that each interaction “transparently recovered and securely validated using multi-signature and a pioneering extended UTXO model.”

That doesn’t make it a slam dunk in my opinion, but at least it has a solid foundation. The problem with Cardano is recognition.

Simply put, it’s not one of the well-known cryptocurrencies vs. Ethereum, Bitcoin and even low-quality coins like Dogecoin (CCC:DOGE-USD) or Shiba Inu (CCC:SHIB-USD).

In other words, it will take a real rising-tides-lift-all-boats bull market rally in the cryptocurrency space to get this one moving. Or most likely, that’s what it will take. It’s hard to imagine Cardano outperforming while the rest of the space rolls over.

InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization less than $100 million or trade with volume less than $100,000 each day. That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators. When we do publish commentary on a low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.