Why is the price of Cardano down today?

Cardano (ADA) is showing weakness today, trading at $1.051, down 1.2% in the last 24 hours. Reduced transaction volume and several onchain signals suggest that ADA may be lowered soon.

Let's take a look at the reasons why the price of Cardano is falling today.

Reduced transaction volume will hurt the value of ADA.

ADA prices have increased more than 225% since November 5, when Americans went to the polls with Republican Donald Trump as the winner.

During this rally, ADA's trading volume rose to $6 billion from $241 million on Nov. 5, according to Santiment data.

The measure shot up again to the ADA's most recent rally to $1.15, setting a 2.5-year high of $6.2 billion on Nov. 24 before quickly falling to its current level of $3.7 billion.

Trading volume is a market indicator used to measure the trader's interest by measuring the total value of tokens exchanged over a period of time. Rising volume has boosted investor interest, often outpacing price growth. On the other hand, a decline in volume leads to lower interest rates, which often results in lower prices.

Therefore, if Cardano's trading volume continues to decline, it will signal a decrease in demand for the Layer-1 token, increasing the possibility of further price declines in the short term.

Cardano's liquidity concentration drops to $0.94

Another factor facilitating ADA's collapse is the liquidity heatmap, a metric that indicates price levels at which massive liquidity is likely to occur, according to CoinGlass.

When liquidity accumulates in a certain area, it often indicates the possibility that the price will decline to that area. High liquid concentration levels are represented in yellow on the liquid temperature map.

The 24-hour liquidity heatmap for Cardano shows that the liquidity is focused on the $0.94 level. This shows that ADA price has a good chance to test $0.94 as support in the near term.

Related: Cardano price risks wiping out 40% of ‘Trump Trade' gains through December

The price of ADA technical setup signals has dropped to $0.95

Data from Cointelegraph Markets Pro and TradingView show ADA trading at $.107 at press time, 7% below the multi-year high of $1.15, which has widened the Bollinger Bands (BB).

BB is a technical indicator that measures volatility around an asset. Depending on the buying or selling pressure in the market, a stretched BB can identify overbought and oversold situations.

A potential selling opportunity occurs when the price touches the upper band, which is a sign that the price is overbought.

The price is currently touching the upper band, suggesting that investors may continue to book profits at the current level, which may lead to a drop to $0.95, the 23.6% Fibonacci retracement level.

The overbought conditions are supported by the Relative Strength Index (RS) at 84 in the oversold territory. In fact, the RSI shows that ADA has been heavily overbought since November 11th.

On the contrary, this situation may change if demand increases due to a resurgence of trading volume. In such a case, the price may return to $1.15 before going higher.

Anonymous crypto investor and analyst DW shared a chart showing a V-shaped recovery of ADA price on an hourly chart, setting a target of $1.32.

“Cardano ADA faces short-term bubble risk with ‘2' warning, indicating price volatility,” fellow analyst CryptoniteUae wrote in a Nov. 25 post on X.

The analyst expressed his belief that the ADA's “long-term progress is stupid” as Price tests key support areas, and that successful defenses of these levels will set the stage for further benefits.

“Investors should be cautious in the short term, but remain optimistic about Cardano's potential recovery.”

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.