3 reasons why every Cardano rally might fail below $0.37

Cardano price continues to rise, but the familiar scenario repeats itself. Since January 20, ADA has increased by about 7%, at one point surpassing higher levels but then quickly stalling around the $0.35 mark. This is not a trend breakout; rather, it’s just a brief rebound lacking the momentum to sustain the upward movement.

There are three main reasons explaining why Cardano’s rallies keep failing, resulting in the market environment still lacking significant positive changes.

Weak Bullish Divergence Only Leads to Short-Term Rebound

The latest surge of ADA was triggered by a hidden bullish divergence signal on the 12-hour chart. From late December to January 20, ADA’s lows were higher, while the RSI indicator formed lower but very shallow lows.

This indicates that selling pressure has eased slightly, but it doesn’t necessarily mean buying pressure has taken control of the market. Such divergence usually only results in short-term recoveries rather than establishing a sustainable uptrend.

Weak Divergence | Source: TradingView In reality, this was proven true: Cardano’s price increased about 7% to $0.37 on January 21, but the rally quickly stalled.

This period also coincided with the Cardano development activity index reaching a peak of 6.94—the highest in a month. Development activity often underpins confidence in the price, and in mid-January, ADA’s local peak appeared right after development activity hit its high.

Development activity peaks then declines | Source: Santiment However, this support didn’t last. When development activity declines, the price also adjusts quickly. Currently, the index has recovered to 6.85 but still hasn’t surpassed the monthly high. The hidden bullish divergence helped prevent a sell-off but hasn’t generated enough demand to sustain the rally when development activity stalls.

Profit-taking pressure intensifies with each ADA rebound

A bigger challenge lies in market behavior after each ADA price increase.

The “spent coins age band” indicator shows the movement of coins across all age groups. An increasing indicator value usually means investors are selling and taking profits. Over the past month, each ADA rebound has been accompanied by a sharp increase in profit-taking activity.

Trading activity peaks | Source: Santiment At the end of December, Cardano’s price rose about 12%, while coin consumption activity increased over 80%, reflecting strong selling pressure during price rises. By mid-January, ADA gained another 10%, with coin consumption activity nearly doubling, indicating investors are continuously riding the wave to exit their positions.

This pattern is repeating. Since January 24, coin consumption activity has increased by over 11%, from 105 million to 117 million, even though ADA’s price has not yet broken resistance levels. This suggests sellers are proactively preparing for the next correction rather than waiting for clear confirmation signals.

Therefore, the upward momentum is weakening, as each rebound is met with stronger profit-taking pressure “ahead of” the rally than the previous one.

Whales reduce exposure, no longer absorbing selling pressure

Typically, large wallets (whales) act as absorbers of selling pressure, helping stabilize the price. However, currently, they are reducing their exposure to ADA.

Wallets holding from 10 million ADA to 100 million ADA have decreased their total holdings from 13.64 billion to 13.62 billion ADA, a reduction of about 20 million ADA since January 21. From January 22, wallets holding from 1 million ADA to 10 million ADA also decreased from 5.61 billion ADA to 5.60 billion ADA, nearly 10 million ADA less.

ADA whales | Source: Santiment This isn’t panic selling, but it clearly indicates a downward trend. The lack of whale buying means selling pressure isn’t being absorbed, making the price more vulnerable to sharp corrections.

Derivatives data also supports this view. In the next 7 days, short liquidations are expected to reach $107.6 million, significantly higher than long positions at $70.1 million. Shorts exceed longs by over 50%, reflecting market sentiment expecting failed rallies rather than sustained increases.

Liquidation map | Source: Coinglass This imbalance suggests that if Cardano attempts to rally again, selling pressure could return very quickly, especially around resistance zones.

Key price levels that will determine Cardano’s next trend

The current price structure makes it easier for investors to identify key levels:

To break free from this repeating cycle, three conditions must be met: development activity must recover and stay above recent highs; coin consumption activity should slow down rather than spike during rebounds; and whales must return to net buying.

Cardano price analysis | Source: TradingView Until these conditions are fulfilled, Cardano’s rebounds will remain vulnerable to selling pressure.