Cardano price suffered a big reversal, reaching its lowest level since July as the crypto market plunged. ADA dropped to a low of $0.6127, down by 32% from its highest level this year. Is it a good buy after forming a bullish engulfing pattern?
Cardano Price is Attempting a Comeback
The daily timeframe chart shows that the ADA price peaked at $1.0186 in August and then bottomed at $0.6127 on Friday as the crypto market crash happened.
This crash happened after the coin formed a rising wedge pattern, which is made up of two ascending and converging trendlines. This pattern normally leads to a strong bullish breakout over time.
The coin has plunged below the 50-day and 200-day Exponential Moving Averages (EMA). It also moved below the important support level at $0.6848, the lowest swing on August 2nd.
A closer look shows that the Cardano price has formed a bullish engulfing pattern. This pattern is made up of a bullish candle that fully covers a previous bearish candle. It often leads to a strong bullish breakout over time.
READ MORE: Will the Crypto Market Go Back Up Soon?
The ongoing Cardano price rally happened as cryptocurrencies attempted to rebound. However, there is a likelihood that the coin will resume the downtrend in the coming weeks as this rebound could be part of a dead-cat bounce. A DCB is a situation where a crashing asset rebounds briefly and then resumes the downtrend.
A bearish breakout will be confirmed it drops below the Friday low of $0.6127. If this happens, the next key level to watch will be $0.5078, the lowest point this year.
Why ADA Price Crashed
There are three main reasons why the Cardano price crashed. First, the crash happened after the coin formed a rising wedge pattern on the daily timeframe chart.
Second, the drop coincided with the recent crypto market crash that led to over $19 billion in liquidation. Cryptocurrencies plunged as investors reacted to an announcement by Donald Trump on new tariffs on goods from China.
The US will implement a 130% tariff on all goods from China starting from November. He made this announcement after China announced several measures, including limits on rare earth metals and tariffs on US ships docking in the country.
Cardano has also plunged because of its weak fundamentals, including its $30 million in stablecoin supply and its $300 million in total value locked, which is much lower than most new chains. As such, it is still unclear whether the upcoming Hydra upgrade will boost its ecosystem growth.
READ MORE: Crypto Fear and Greed and Altcoin Season Index Slumps as Losses Mount
