Algorand’s price has faced a sharp decline of 34%, dropping from $0.61 to a critical support level of $0.40. This steep correction came amidst a shift in the broader cryptocurrency market, triggered by Bitcoin’s dominance reclaiming momentum and cooling off altcoin gains.

As ALGO now hovers around the $0.40 demand zone, traders are closely watching for signs of recovery. Will this level hold firm, or are further losses on the horizon? Let’s analyze the technical outlook and potential price scenarios for Algorand.

ALGO at a Crossroads: $0.40 Support in Focus

The $0.40 price zone has proven to be a crucial demand area for Algorand. Historically, this level has offered significant support, especially during November’s bullish price imbalance. However, ALGO’s latest bounce from this level failed to breach its upper channel resistance at $0.43, indicating persistent selling pressure.

At the time of writing, ALGO’s price is consolidating near $0.40. Technical indicators, however, suggest a lack of strong demand, which could hinder any meaningful recovery:

1. Relative Strength Index (RSI): ALGO’s RSI remains below average, signaling weak buying momentum. This indicates that the altcoin has yet to attract enough demand to reverse its bearish trend.
2. Chaikin Money Flow (CMF): While capital inflows have slightly improved, the CMF remains below the zero mark, highlighting that buyers are still hesitant to re-enter the market.

If these indicators remain muted, a potential bounce from $0.40 may face another rejection at the $0.43 resistance zone. In the worst-case scenario, a break below $0.40 could send ALGO spiraling down to its next key support at $0.33 — a level last seen during March’s price highs.

Short Sellers Hold the Edge

On the 4-hour chart, the Super Trend indicator has maintained its bearish signal since December 9, reinforcing ALGO’s ongoing downtrend. This signal suggests that short positions remain more favorable in the current market structure.

Further supporting this bearish outlook is the Cumulative Volume Delta (CVD), which shows flat demand in the spot market. A lack of strong spot buying has allowed sellers to maintain control, adding downward pressure to Algorand’s price.

Key Levels to Watch:

• Immediate Support: $0.40 – A failure to hold this level could trigger a further drop to $0.33.
• Resistance: $0.43 – Bulls need a decisive breakout above this level to signal a trend reversal.

What’s Next for Algorand?

For Algorand to stage a recovery, buyers need to step in with strong conviction. A rebound from $0.40 or, in a more bearish case, $0.33 could signal a reversal if it is supported by increasing capital inflows and rising RSI values.

However, any recovery attempt must clear the $0.43 resistance zone to confirm a shift in market sentiment. Until then, the short-term outlook for ALGO remains uncertain, with sellers holding the upper hand.

Final Thoughts

Algorand’s recent 34% price drop highlights the altcoin’s struggles amidst a market dominated by Bitcoin’s strength. While $0.40 serves as a key support level, the lack of demand and weak technical indicators raise concerns about further downside.

Traders should monitor price action closely at the $0.40 and $0.33 levels. A strong bounce from these areas, backed by rising demand, could pave the way for recovery. On the other hand, failure to hold support may see ALGO revisit lower levels, prolonging its bearish phase.

As the market remains uncertain, short-term traders may find opportunities in short positions, while long-term investors will look for confirmation of a trend reversal before re-entering the market.