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Health, Wealth, and Happiness
September 6, 2022
“Anything that’s not positive, I don’t have the energy to focus on it. Anything that’s not going in the right direction, I don’t have the time or the energy.”
– DMX
Crypto Market Outlook
by Steve Walters
Most of the major cryptocurrencies have experienced zero to little change over the past seven days as investors await the upcoming Ethereum Merge (read our investor guide) while continuing to focus on news regarding inflation, central bank moves, and the possibility of a recession.

However, while leaders like bitcoin and Ethereum have seen moves of just 2% or so over the past week, another top 10 coin has done much better.

That coin is Cardano (ADA), and investors seem to be getting excited now that a date for the latest network upgrade (called Vasil) has been announced.

September 22 is the date for this hard fork of the Cardano blockchain, which is scheduled just after the Ethereum Merge.

This Vasil upgrade is highly anticipated as it has been delayed for roughly three months. The upgrade promises to deliver improved scalability accompanied by lower transaction costs. (Full technical breakdown here.)

Cardano Technical Outlook

On a short-term basis, Cardano is looking to break from its long-term downtrend. Recent action has seen the price print a double bottom at the $0.4265 level. From there, the token has begun to trend higher and is currently looking possibly overbought. A pullback to the $0.464 level would present a better buying opportunity from a technical perspective, as that level is supportive from two different trendlines.
Image via TradingView

The pattern seen above is an ascending triangle. It is considered to be a continuation pattern. That is, once the price breaks out (in this case, that breakout was up through the line created by the recent swing highs), it is expected to continue moving in the same direction. In this case, that direction is higher.

Zooming out to a higher timeframe shows a bit of a different picture, however. The daily chart shows ADA is clearly in a downtrend, though the slope of the trendline has become far less pronounced, recently. This could be a signal that a reversal is in the air. A break above the $0.5475 level would be a sure sign that a reversal is in the works, and with the Vasil upgrade less than three weeks away, that move should be coming soon.
Image via TradingView

On-Chain ADA Data

In terms of on-chain data, we’re seeing some bullish signs as well. The first of those is the total number of Cardano addresses. That number continues to grow at a healthy pace, indicating growing support for the network and optimism for the future of the Cardano blockchain.
Image via Into the Block

Another related on-chain statistic is the length of time ADA is being held. Recently, the number of short-term traders (those who held ADA for less than one month) has declined significantly, while those holding for over a month is increasing.

This indicates that not only is ADA being accumulated, but this accumulation is happening with those who aren’t nearly as likely to sell. A lack of supply will help support higher prices and could aid with the next metric we want to look at.
Image via Into the Block

Finally, we have the proportion of ADA holders who are profiting from their holdings versus those who are looking at losses. Currently, there are more ADA tokens that are underwater than those in profit. Looking at the chart below, we can see the ADA tokens being held at a loss are at an all-time high. When combined with the metric showing that the length of time these tokens are held is increasing dramatically, it makes sense to think this group is not interested in selling at a loss.

Also, if we look at the price of ADA historically in combination with the times that have seen a large number of tokens being held out of the money, we can note that the price does rebound strongly once it hits these low levels. You can see this clearly in the spikes higher off the December 2019 lows, the April 2020 lows, and the March 2022 lows.
Image via Into the Block

Investor Takeaway

With the challenging macroeconomic environment continuing to weigh on crypto markets, it’s difficult to see a way higher for many of the top cryptocurrencies. However, Cardano does have a compelling case in the short term. The upcoming Vasil hard fork is likely to be bullish, and the short-term technical and on-chain metrics also look promising.

We believe in Cardano as a long-term project. You can see our analysis here. With the price of ADA still at fairly low levels, this could be a good time to add ADA to your holdings or increase your current ADA stash. As a proof-of-stake blockchain, Cardano also provides you with the opportunity to earn some yield on what might otherwise be idle capital.
Health, wealth, and happiness,

Steve Walters
BMJ Market Analyst
ICYMI
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