The cryptocurrency market has opened the new year with significant momentum, boasting a total market capitalization of approximately $3.3 trillion. Riding this bullish wave, Cardano (ADA) traded near $0.42 on Tuesday, marking an advance of almost 6%. However, as Bitcoin posts moderate gains and XRP surges, ADA faces a pivotal technical decision point that could define its trajectory for the remainder of the first quarter.

A Broader Altcoin Tailwind Emerges

Cardano’s performance is unfolding against a backdrop of strengthening market-wide conditions. Bitcoin has stabilized around $93,700, providing a solid foundation for alternative cryptocurrencies. A key technical indicator, the monthly Moving Average Convergence Divergence (MACD) for the altcoin-to-Bitcoin ratio, has turned bullish for the first time since March 2024. This shift signals potential broad-based strength for altcoins. Notably, XRP has skyrocketed over 12% to $2.37, fueled by substantial ETF inflows. While ADA’s gains are more measured than XRP’s, it is currently outperforming Solana, which advanced 3.98% to $139.

The 200-Day Line: A Formidable Barrier

After finding a low near $0.33 in late December, Cardano has staged a recovery, now trading above its 20-, 50-, and 100-day moving averages—a sign of short-term bullish momentum. Yet the rally is stalling at a crucial long-term threshold: the 200-day moving average, currently positioned at $0.42. This level traditionally demarcates long-term bullish trends from bearish ones.

Key price levels to watch:

Should investors sell immediately? Or is it worth buying Cardano?

• Resistance: The primary hurdle lies in the $0.428 to $0.432 zone. A decisive and sustained breakout above this area could pave the way for a move toward $0.45 and potentially $0.48.
• Support: Should the breakout attempt fail, initial support is expected between $0.40 and $0.395. A breach below that would likely see ADA test the next significant zone around $0.38.

Diverging Signals Between Traders and Investors

Market data reveals a notable split in sentiment. On one hand, Open Interest in the derivatives market remains stable above $800 million, indicating that speculative traders are maintaining their positions in anticipation of significant price movement. Conversely, capital is flowing out of the spot market, suggesting a lack of conviction among long-term holders at current price levels.

Tuesday’s upward move is partly attributable to a broader short squeeze across crypto markets. On January 6th, total liquidations reached approximately $410 million, with a substantial $330 million stemming from closed short positions. This forced buying activity provided additional upward pressure for ADA and other assets.

Outlook: The $0.43 Threshold is Paramount

The immediate future for Cardano hinges on its ability to conquer the $0.43 level. A daily close above this price would confirm the recovery from the December low and align ADA with the bullish year-start observed across the broader crypto market. Failure to achieve a clear breakout, however, risks a consolidation phase back toward the $0.40 support area. The coming trading sessions will be decisive in determining whether Cardano can sustainably reclaim its 200-day moving average or face another rejection.

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