Cardano (ADA) Surges 8.5% This Week: What's Behind the Rally?

ADA's upward momentum is driven by market trends, network activity, and Solana's recent setback.

Cardano (ADA) has witnessed a significant surge this week, marking an 8.5% increase, reaching $0.535 by February 8. The majority of this weekly gain, approximately 6.5%, occurred in the past 24 hours, influenced by a combination of technical factors, on-chain data, and foundational developments.

Overall Market Uptrend Boosts Cardano

Cardano's upward movement aligns with positive sentiment across the broader crypto market. Leading cryptocurrencies like Bitcoin and Ether have seen week-to-date increases of over 4% and 5.25%, respectively.

The correlation coefficient between Cardano and Bitcoin remains largely positive, indicating heightened interest in crypto assets overall. The recent approval of Bitcoin-based exchange-traded funds (ETFs) in the U.S. and anticipation surrounding Bitcoin's upcoming halving event in April contribute to the positive trend.

Travis Kling, CIO at Ikigai, points to the Federal Reserve's rate cut policy as a significant catalyst for the crypto market rally, influencing ADA's price.

Increased On-Chain Activity

Alongside market trends, Cardano's price rally is influenced by improvements in its on-chain activity. The total value locked (TVL) in the Cardano ecosystem has grown from 660.30 million ADA to 720.91 million ADA in the last 24 hours, indicating growing adoption.

Additionally, Cardano's price surge coincides with a rebound in daily active addresses and daily transactions count.

Solana Outage Favors Cardano

Cardano's recent rally follows Solana's network outage on February 6, with both platforms being layer-one blockchain rivals. ADA has seen a 6.7% increase in value compared to SOL since the outage, suggesting a potential shift in investor strategy.

Traders, adopting a cautious approach, seem to be reallocating funds from the Solana ecosystem to Cardano, possibly seeking safety amid market volatility.

Cardano's Technical Setup

Cardano's upward trajectory initiated at a critical support level, identified by the confluence of a horizontal trendline at $0.494 and the lower trendline of ADA's existing bear flag formation.

As of February 8, ADA's price is eyeing upward continuation toward the flag's upper trendline near $0.55. However, the bearish nature of bear flags indicates a likelihood of a breakdown, with a potential price target around $0.421.

In case of a breakdown, ADA's targeted price level could adjust to around $0.421 by the end of February, representing a 20% decline from current levels.

ADA's Bull Flag Setup

The bear flag downside target aligns with the lower trendline of ADA's broader descending channel pattern, resembling a bull flag. This suggests the potential for ADA's price to rise toward $0.72 by March or April.

(Photo Source / Coinbase)