There is little doubt that Bitcoin and other crypto assets are in the grip of a bear market. People have a lot of questions. How long will it last? If you still have crypto positions, do you sell them or hold them? When will it be safe to start buying again? Where is the bottom, and how low will prices go?
The crypto market is notorious for its volatility, and this bear market has highlighted that. Despite the volatility and panic may be causing, this bear market seems relatively normal so far.
This article focuses on the cryptocurrency Cardano (ADA). How low can its price drop? Is now a good time to buy Cardano (ADA)?
Can Cardano (ADA) Drop Lower Than $0.15?
First, let’s look at Cardano’s performance during last year's bull market and how the price has fared since the peak. The price of Cardano (ADA) on the Binance exchange will be used for this analysis. The price of ADA rose from a low of $0.167 on Jan. 1, 2021, to $3.16 on Sept. 2, 2021, for an increase of almost 1,800%. Those are incredible gains, but since the peak, it has been pretty much all downhill.
That isn’t a problem only faced by ADA; the entire crypto market has been in a bear market since late last year. It remains a fact that most cryptocurrencies are highly correlated with Bitcoin. Where the price of Bitcoin goes, the rest of the crypto market follows. As with anything, there are some exceptions, but they are rare.
How low will the price of ADA go? During the height of the last bear market, ADA hit a low of around $0.03 in January 2020. ADA did dip down to $0.017 during the COVID crash (March 2020), but that was an unprecedented event. Is it possible for ADA to drop that low again during this bear market? Anything is possible, and how the price of ADA will depend mainly on how far the price of Bitcoin pulls back.
On May 9, 2022, ADA started a four-day pullback that saw the price hit a low of $0.383. The price immediately bounced to regain the weekly 200 SMA and has recovered to around $0.58.
The major support levels for ADA appear to be at about $0.38, $0.16, $0.10, $0.06 and $0.03. So, with the current price action, it seems unlikely that the first support at $0.38 will hold.
Everything, though, will depend on what Bitcoin does. Bitcoin has already pulled back to around $29,000 from its peak, which equates to a drop of about 58%. The last two bear markets saw Bitcoin pullback around 85%. If that happens again in this bear market, the price of Bitcoin would bottom at around $10,000. In that scenario, the price of ADA would see a significant pullback and might approach its low set in 2020.
Not knowing how far Bitcoin will pull back makes it difficult to forecast how far ADA will pull back. It is unlikely that the $0.38 support level will hold unless Bitcoin is already near its low for this bear market. More than likely, the $0.38 level will fail and, depending on what Bitcoin does, possibly even the $0.16 level. That would leave the $0.10 level, which should be a pretty strong support level. But even that level could be breached if Bitcoin experiences a severe pullback.
The reaction of many people during a bear market is to panic. This one is only about six months old, and already people on social media are posting that Bitcoin and crypto are dead. Doom and gloom are nothing new; it happens every bear market cycle.
History has shown that bull and bear cycles are just part of the market. Cardano may experience a severe pullback, but because it is one of the top-tier cryptocurrencies, so chances are very good that it will recover right along with Bitcoin.
Why is Cardano (ADA) Going Down?
Let's take a look at why the price of ADA is under such pressure. The price of ADA hit a new all-time high on Sept. 2, 2021, and started falling immediately afterward. There are likely a few reasons for this. The price of Bitcoin had a nice push higher during August and the first week of September. After that, it suffered a pullback of about 25% that undoubtedly put pressure on the price of ADA.
Also, ADA most likely experienced a classic buy-the-rumor-sell-the-news event. The event was the Alonzo Hard Fork, which introduced smart contracts to the network. This major upgrade took place on Sept. 12, 2021. It’s possible that many investors bought ADA for the gains leading up to the hard fork and then sold afterward.
Two other events probably hurt the price of ADA. The first is China’s central bank declaring that cryptocurrency trading and all related services, including Bitcoin mining, are illegal. The other event was an announcement by eToro that they planned to delist ADA in the United States because of regulatory concerns.
All these events, along with negative investor sentiment, probably hurt the price of ADA between September and November. Bitcoin’s steady drop after peaking on November 10 also has put a great deal of pressure on the price of ADA.
How to Short Cardano (ADA)
For those who would like to trade ADA short, there are a couple of ways to do it. Anyone outside the United States or any other restricted country can open a ByBit account and use margin to short ADA. Shorting and using margin carries significant risk, so educate yourself first before trading. It is also possible to short ADA on the Binance and FTX exchanges using margin if your country isn’t restricted.
Another way to short ADA is to buy a 3X short Cardano token. It is available on the Poloniex and FTX exchanges. You can also purchase the 3X short Cardano token using the Coinbase wallet; here are the instructions.
Can Cardano (ADA) Still Hit $1.00 In 2022?
Even though crypto remains in a bear market, it is still possible to see significant upward price swings. If Bitcoin were to make a substantial move higher, it is possible for the price of ADA to exceed $1.00. As long as the bear market persists, that pump in price would most likely only be temporary.
It is also possible that the bear market could end before year-end. If that happens and Bitcoin moves higher, that will pull the price of ADA up as well. No one knows when this bear market will end, but it will not end until Bitcoin bottoms and investor sentiment flips bullish.
Where to Buy Cardano (ADA)
Cardano (ADA) is currently ranked #7 by market capitalization, so it is one of the top cryptocurrencies and is available at 78 exchanges. Some centralized (CEX) exchanges include Binance, Binance.US, Bitfinex, Coinbase, Crypto.com, Voyager, Webull and Kraken. It’s also possible to buy ADA on decentralized exchanges. PancakeSwap supports ADA and a synthetic version of ADA called sADA is supported on UniSwap and 1inch.
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
Will Cardano (ADA) Keep Crashing?
Crashing is a strong word, but until Bitcoin forms a bear market bottom, altcoins will continue to follow Bitcoin lower. As witnessed recently, bear markets can be volatile, and the volatility extends to altcoins. So the possibility of severe moves lower is always a possibility.
Is Now a Good Time to Buy Cardano (ADA)?
Whether or not now is a good time to buy any crypto is a decision that each investor must make on their own. Also, you should only invest what you are willing to lose. Far too many people invest way more than they should then panic when prices go against them.
Also, it is wise to have a plan in place for each position before investing. Will it be a long-term investment (years) or a short-term investment (months)? If it is a short-term investment, you will want to have an exit strategy if the market goes against you. Having a plan will reduce stress and the chances of making emotional decisions.
Currently, Bitcoin and the rest of the crypto market are stuck in a bear market. If you want to start building a position in Cardano, doing so after a sustained pullback is advisable, especially if you can begin near the bear-market bottom. Since no one knows where the bear market bottom will be, the best strategy is to dollar-cost-average into a position.
Dollar-cost averaging (DCA) is when you buy a fixed dollar amount of an asset at regular intervals. For example, you could buy $25 worth of ADA every Friday. If you don’t want to buy that often, you could buy $25 worth every month.
The important part is to purchase the same dollar amount at whatever interval works best for you. Using this strategy when ADA is more expensive, you will be buying smaller amounts and when it is cheaper, you will be buying larger amounts with each purchase. The aim of this strategy is to give you a lower overall average price.
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About Donald Hancock
Donald’s expertise lies in the technical analysis of both stocks and crypto.