Cardano (ADA) recorded a recovery of more than 2% at the time of writing on Tuesday; however, the upward momentum remains quite fragile as the price continues to fluctuate within a descending wedge pattern. Despite the overall trend still being under weakening pressure, the Cardano ecosystem has witnessed a significant breakout in on-chain transaction volume over the past two weeks, especially after the launch of the privacy-focused sidechain named Midnight. Nevertheless, indicators in the derivatives market still reflect a cautious sentiment, with an advantage leaning towards the bears.
Bearish sentiment persists despite increased trading volume after Midnight's launch
Cardano's on-chain activity exploded in December, right after the Midnight sidechain was officially deployed. The transaction value peaked at 19.74 million USD on 10/12. According to data from TapTools, the trading volume on Sunday recorded 16.11 million USD, a surge compared to 6.39 million USD the previous day, indicating that capital is returning to the network significantly.
Transaction volume in the Cardano ecosystem | Source: TapTools
In parallel, the number of unique trading wallets also increased sharply, reaching 3,150 wallets in December and maintaining around 2,200 wallets on Sunday, reflecting the increasingly broad participation of investors.
Unique wallets active in the Cardano ecosystem | Source: TapTools
However, in the derivatives market, cautious sentiment still prevails. Data from CoinGlass shows that the open interest (OI) of ADA futures contracts has decreased by 1.57% within 24 hours, down to 666.25 million USD, implying that many traders are reducing their positions or decreasing leverage usage.
Notably, the funding rate weighted by OI is currently at -0.0079%, meaning that bears have to pay fees to maintain short positions, reflecting the dominance of bearish sentiment in the derivatives market.
ADA derivatives data | Source: CoinGlass
Cardano recovers in the descending wedge pattern as selling pressure weakens
On the daily logarithmic chart, Cardano is moving within the descending wedge pattern, established by two converging trend lines. At the time of writing, the price of ADA increased by more than 2% in Monday's trading session, marking a recovery phase after two consecutive correction sessions while attempting to maintain the upward momentum of around 7% recorded on the previous Friday.
If the recovery trend is reinforced, ADA is likely to target the upper trend line of the pattern, connecting the peaks formed on 27/10 and 9/12, corresponding to the price range around 0.4350 USD.
Daily ADA/USDT chart | Source: TradingView
Technical indicators on the daily chart are signaling positively as selling pressure shows signs of weakening. The relative strength index (RSI) is currently at 38, having bounced back from the oversold area and is gradually approaching the neutral line. Meanwhile, the MACD line continues to narrow the gap with the signal line, increasing the likelihood of a bullish crossover— a sign often associated with an improvement in price momentum.
In the opposite scenario, the lower trend line of the descending wedge pattern, connecting the lows of 21/11 and 1/12 around the mark of 0.3415 USD, is expected to serve as the nearest support zone, helping to limit the risk of deeper corrections.
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