According to historical data, Cardano (ADA) may be entering overvaluation territory. This comes after an impressive 180% price increase in the past 30 days.
For some investors, the timing seems wrong, especially when the altcoin season is expected to begin. However, on-chain indicators suggest that ADA could face a correction before reaching a new high.
Cardano Index Signals a Downtrend
One key indicator that suggests that Cardano may soon be overvalued is the Market Value to Realized Value (MVRV) Long/Short Difference. This indicator checks whether long-term holders have more unrealized profits at the current price or short-term holders.
When the index increases, it means that long-term holders have generated more profits. On the contrary, if it declines or falls into negative territory, it means short-term holders prevail.
This spread also helps detect when a cryptocurrency is under or overvalued. According to historical data, Cardano’s price reached extreme levels when the MVRV Long/Short Spread reached 57.94% in March.
As seen above, the index has reached 52.71%, suggesting that ADA may be approaching overvaluation. If this is confirmed, then altcoin prices could undergo a significant correction.
Additionally, data from IntoTheBlock shows that the Network Value to Transactions (NVT) ratio is increasing. The NVT ratio is an indicator used to evaluate the valuation of a cryptocurrency compared to the value transmitted through the network.
When this ratio decreases, it means that trading volume has surpassed market capitalization growth, indicating that the token is undervalued. Conversely, when the NVT ratio increases, as it is now, it shows that the Cardano market capitalization has increased faster than the value being traded. If this continues, ADA may be considered overvalued and the value may decrease.
ADA Price Forecast: Less than 1 USD
From a technical perspective, the daily chart shows that the Bollinger Bands (BB) have widened. This notable expansion indicates high volatility around ADA, hinting that price movements in the coming days could be huge.
However, beyond that, BB’s upper band touched the ADA price at $1.30. When this index touches the price, it means that too much has been bought. Conversely, when the lower band does this, it indicates an oversold state.
Therefore, it appears that the Cardano Token is in an overbought state. Considering this condition, Cardano price could drop to 0.92 USD. Conversely, if buying pressure increases, this may not happen and ADA could rise above $1.40.