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Despite Bitcoinâs stagnation, Cardano (ADA) has performed extremely well over recent weeks.
Data from crypto research firm Messari shows that the leading altcoin is up 150% since the start of the year. This is a much better performance than almost all top-50 cryptocurrencies, save for a few outliers in the DeFi space.
Cardano vs. other smart contract cryptocurrencies since the start of 2020. Chart from Messari
A full-time trader, however, thinks that ADAâs outperformance wonât last for long. He shared a chart indicating that the cryptocurrency has formed the same bearish signal last seen at Cardanoâs 2019 peak.
Cardanoâs Bullish Trend May Not Last For Long: Trader
A trader shared the image below on July 1st, noting that Cardanoâs performance charted against Bitcoin is forming a bearish divergence. The analystâs indicator is trending lower while prices trends higher, suggesting underlying weakness:
âThe reason Iâm building the ADA short here. If we invalidate the divergence Iâm happy to step out the way. Until then Iâll continue to slowly build this position until the div confirms, at that point I can ramp up,â he commented on the chart.
The divergence that has formed is especially pertinent as it formed prior to ADA falling ~75% against Bitcoin from Q2 2019 to Q4 2019.
Cardano (ADA) analysis by full-time trader Cold Blooded Shiller (@ColdBloodShill on Twitter). Chart from TradingView.com
Buy the Rumor, Sell the News?
ADAâs extreme outperformance over recent weeks has largely been tied to the assetâs underlying fundamentals.
As of the time of this articleâs writing, the underlying Cardano blockchain is going through what is known as its âShelleyâ upgrade.
Shelley is a phase of the blockchainâs development that will increase its performance while optimizing for decentralization. This will be done through a Proof of Stake system. As the Cardano Foundation explains:
âShelley will also see the introduction of a delegation and incentives scheme, a reward system to drive stake pools and community adoption⊠Come the end of the Shelley era, we expect Cardano to be 50-100 times more decentralized than other large blockchain networks.â
With ADA rallying off that implementation, the cryptocurrency could see a âsell the newsâ drop afterward. This is similar to what happened with Bakkt and Bitcoin in 2019 and the CME/CBOE futures rally in 2017.
Cardanoâs Fate is Tied to Bitcoin
In some senses, the fate of ADAâs price trajectory is tied to that of Bitcoin. After all, Coin Metrics data shows that the two cryptocurrencies have a positive 180-day correlation of 0.84.
Fortunately for Cardano bulls, analysts are once again becoming optimistic about BTC.
As reported by Bitcoinist, Glassnode CTO Rafael Schultze Kraft observed that Bitcoinâs on-chain trends are stronger than they have been in months. He observed that the number of hourly new BTC addresses reached a two-year high while the hourly count of transactions reached a 10-month high.
Thereâs also the simple fact that more than 62% of all BTC hasnât moved in a year.Â
âBitcoin 1yr HODL new ATH!! We have reached a new all-time high, with 62% of bitcoin not moving on-chain for at least 1 year. Strong hands from hodlâers! Such high levels of HODLâing have been present at the start of previous Bitcoin bull runs,â on-chain analyst Philip Swift recently wrote in regards to the image below.
Bitcoin 1 year+ HODL Wave indicator from on-chain analyst Philip Swift (@PositiveCrypto on Twitter)
Featured Image from Shutterstock
Price tags: adausd, adabtc
Charts from TradingView.com
Cardano (ADA) Is Forming the Signal That Preceded a 75% Bear Market: Analyst
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.