Why is Cardano (ADA) price up this week?
Cardano (ADA) experienced a notable rise at the start of this week, rising over 3.70% to reach $0.476 on May 6.
ADA’s rise today mirrors upside sentiment elsewhere in the crypto market. For instance, Bitcoin (BTC) and Ether (ETH), the leading cryptocurrencies by market cap, have risen by approximately 2.5% and 2.70%, respectively.
This uptrend reflects a growing interest in cryptocurrencies, spurred by a less aggressive monetary policy outlook from the U.S. Federal Reserve for 2024. Concurrently, ADA is benefiting from several additional bullish catalysts discussed below.
Cardano founder teases Bitcoin Cash partnership
ADA’s gains today follow the Cardano founder Charles Hoskinson’s proposal to partner with Bitcoin Cash (BCH).
On May 4, Hoskinson conducted a “hypothetical poll” on X, querying the community’s interest in integrating Cardano with Bitcoin Cash. The poll had garnered over 14,360 votes as of May 6, with 68.1% in favor.
Hoskinson introduced the term “partnerchain” to suggest that Bitcoin Cash would need to be bridged or cross-chained for compatibility with Cardano’s proposed upgrades. However, reaching an agreement on the technical specifics and achieving consensus among stakeholders and developers remains a necessary hurdle.
ADA’s crypto market dominance improves
ADA’s gains today are largely attributed to a shift in capital from Bitcoin, which holds over 50% of the crypto market’s valuation, to Cardano.
On May 6, the closely monitored ADA/BTC pair rose by 1.54% to 729 satoshis. Simultaneously, the Cardano Dominance Index (ADA.D), measuring ADA’s market cap relative to the total crypto market, also increased.
These developments suggest that ADA is gaining ground against Bitcoin while capturing a larger share of the total crypto market capitalization.
That is further visible in the net capital flows across crypto asset funds in April. Cardano funds received $1.5 million, but Bitcoin and Ether funds lost $54 million and $123.8 million, respectively, according to CoinShares weekly report.
Cardano shows signs of further recovery against Bitcoin, according to a growing bullish divergence between ADA/BTC and its daily relative strength index (RSI). That is akin to a bullish divergence signal in October-November 2023 that preceded a 30% rally.
Cardano price outlook
Cardano’s gains today are part of a technical bounce initiating from its interim support level at around $0.455. Interestingly, this support level coincides with the trough of the right shoulder of ADA’s prevailing inverse-head-and-shoulders (IH&S) pattern, as shown below.
IH&S patterns resolve after the price breaks above the neckline resistance and rise by as much as the maximum distance between the head’s trough and the neckline. Therefore, ADA’s upside target comes to be around $0.543 in May if its price breaks above the neckline resistance at $0.476.
Related: Back to extreme greed past $65K? 5 things to know in Bitcoin this week
Conversely, a pullback from the IH&S neckline risks triggering a head-and-shoulder setup, as shown in the daily chart below. The point where a potential pullback might occur aligns with ADA’s descending trendline resistance.
The downside of the pattern at $0.351, which is also a descending trendline support, is where the price might target in May if the pattern completes.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
