The new year began with strong momentum for Cardano (ADA), but that bullish energy is now facing a significant challenge. A confluence of factors—including an extraordinary surge in derivatives activity, a crucial technical indicator, and a pivotal price support zone—are placing the cryptocurrency’s recent uptrend under intense scrutiny this week. The central question for investors is whether the positive structure established since January can endure or if sentiment will reverse following the robust start.

Derivatives Frenzy and Market Tension

Perhaps the most striking development this week emerged not from the spot market but from derivatives trading. On the Bitmex exchange, trading volume for Cardano futures exploded by more than 25,000% in a single day, reaching $162 million. This represents a statistical outlier, even within the typically volatile crypto sector.

This abrupt spike in activity suggests a substantial repositioning by larger market participants. Coinciding with this, the broader crypto market witnessed total liquidations amounting to $465 million, predominantly affecting long positions. For ADA, the combination of elevated open interest and a price retreat toward the $0.40 level creates a tense dynamic: late long positions are meeting increasingly active short speculators. This setup typically fosters conditions ripe for sharp price movements in either direction.

Technical Picture: The $0.40 Battleground

Following a notable advance since the start of the year, ADA has pulled back to hover around the $0.40 region. This area carries dual technical significance. It aligns closely with the 50-day moving average, marking a core support level within the short-term upward trend.

Notably, a “Golden Cross” pattern has recently formed on shorter-term charts, specifically the 2-hour and 4-hour timeframes. Here, the 50-period moving average has crossed above the 200-period average—a configuration often interpreted as a potential shift in momentum favoring buyers. However, a resistance level just above the current price has so far capped any breakout attempts, acting as a brake on further gains.

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

Trading near $0.40, ADA currently sits approximately 21% above its yearly low but remains more than 50% below its 52-week high. The Relative Strength Index (RSI) reading around 32 indicates the market is drifting toward oversold territory without yet entering extreme zones.

Ecosystem and Regulatory Developments

Beyond price action, Cardano’s ecosystem continues to evolve. A recent governance decision authorized the release of 70 million ADA from the project’s treasury. These funds are earmarked for core integrations and growth initiatives, with a focus on decentralized applications (dApps) and network infrastructure.

Concurrently, development work on the Ouroboros Leios protocol upgrade is progressing. According to public development trackers maintained by Input Output Global, implementation is approximately 67% complete. This upgrade aims to significantly enhance the network’s transaction capacity and efficiency, addressing long-term scalability goals.

On the regulatory front, attention remains on U.S. oversight. While no spot ETF for Cardano has been approved to date, the Grayscale Cardano ADA Trust remains under review by the SEC. Decisions are anticipated in the early part of this year. Market observers view the progression of this process as an indicator of how open regulators might be to institutional access to ADA in the future. Positive developments could bolster the cryptocurrency’s perception among professional investors, whereas delays or stringent conditions could have a dampening effect.

Sentiment and Forward Outlook

Despite the solid start to the year, overall market sentiment has noticeably cooled. The sector-wide “Fear & Greed Index” registers at 26, signaling clear risk aversion. For ADA, the immediate focus rests on one key technical condition: as long as the zone around $0.40 holds as support, the recent bullish structure—including the Golden Cross—remains intact. A decisive break below this critical level, however, would likely flip the narrative and call the short-term upward move into question.

Ad

Cardano Stock: Buy or Sell?! New Cardano Analysis from January 9 delivers the answer:

The latest Cardano figures speak for themselves: Urgent action needed for Cardano investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from January 9.

Cardano: Buy or sell? Read more here...