While Cardano’s ADA token continues to navigate a severe corrective phase, a classic technical formation on its chart is hinting at a potential reversal. The digital asset has shed nearly two-thirds of its value since October, with the $0.35 support level now under threat. However, this price decline is unfolding alongside the emergence of a bullish divergence and significant developments within its ecosystem, including the strategic pivot toward the Midnight protocol.
A Pivotal Technical Setup Emerges
Despite persistent weakness, Friday’s trading revealed a compelling technical picture. ADA is forming a falling wedge pattern on its daily chart—a formation analysts often interpret as a precursor to a trend reversal. Current support is clustered between $0.34 and $0.35. A decisive break below this zone could see the price test the psychologically significant $0.30 level.
On the upside, the first major resistance awaits at $0.39. Market experts suggest that a confirmed breakout above this barrier could trigger a rally toward $0.51, representing a potential gain of approximately 45%. Adding credence to this optimistic view is the Relative Strength Index (RSI), which is displaying a bullish divergence. This indicates that selling pressure is waning even as prices continue to fall.
Sentiment in the derivatives market tells a more cautious story. Open interest for ADA futures contracts has plummeted from $1.72 billion in October to roughly $630 million currently. This reduction in leveraged positions suggests traders are exercising restraint heading into the new year. Conversely, spot trading volume surged by 96% to $677 million, signaling an intense battle between buyers and sellers at these price levels.
On-Chain Metrics and Strategic Shift
Network activity presents a mixed bag. The Total Value Locked (TVL) within Cardano’s decentralized finance ecosystem has declined to $215.5 million, a notable drop from its August high of $544 million. The network’s stablecoin capitalization has also contracted, now standing at $37.68 million.
Should investors sell immediately? Or is it worth buying Cardano?
A key positive signal comes from exchange flows. Data shows net outflows of around $2 million worth of ADA from exchanges daily. Such movements typically indicate accumulation, as investors transfer holdings to private wallets for long-term storage, thereby reducing immediate sell-side pressure.
The broader strategic focus for Cardano is firmly on the development of the Midnight protocol. Founder Charles Hoskinson, in a December 25 statement, described it as a “Manhattan Project for data-protecting technology, chain abstraction, and smart compliance.” He is currently dedicating efforts to producing 80 to 100 pages of technical documentation daily for internal workshops scheduled in January 2026.
Positioned as a data-protection layer for Cardano, Midnight will feature its own token, NIGHT, designed to complement rather than replace ADA. Interestingly, while ADA struggles, the NIGHT token has shown relative strength. It is trading at $0.07676 with a market capitalization of $1.27 billion and posted gains of nearly 20% over the past week.
Regulatory Countdown and Immediate Price Outlook
The regulatory landscape in Europe is adding urgency to these developments. The Lithuanian Central Bank has issued warnings to crypto service providers, noting that operations without authorization after December 31, 2025, could result in severe penalties, including potential prison sentences. This looming deadline underscores the relevance of Cardano’s “smart compliance” focus through the Midnight protocol.
All eyes are now on the $0.39 resistance level. Reclaiming this price point would confirm the bullish falling wedge breakout and open the path for a recovery. Should ADA fail to overcome this hurdle, the bearish scenario targeting $0.30 remains in play. In that case, the mainnet launch of Midnight in 2026 could serve as a fundamental catalyst for a longer-term trend reversal.
Ad
Cardano Stock: Buy or Sell?! New Cardano Analysis from January 10 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 10.
Cardano: Buy or sell? Read more here...