Cardano (ADA) is currently facing a critical point in its price action, with the potential for significant liquidations if the price rises by 9%. Traders are particularly concerned as ADA approaches the $0.77 resistance level, which could trigger around $20 million worth of short contract liquidations if breached. However, despite this potential, ADA’s recovery seems uncertain due to a lack of strong market momentum and declining participation from active addresses.

The Challenge of Surpassing $0.77

Cardano’s market momentum has been relatively weak, with its price recently hovering around $0.70. While the altcoin has managed to hold above this level, the immediate challenge remains breaking through the $0.77 resistance. This would require an increase of approximately 9%, which could be difficult given the current market conditions. If ADA successfully breaches $0.77, the next target for traders would be $0.85, signaling a potential rally.

However, the broader sentiment in the market is cautious. A failure to break through the resistance level could result in ADA’s price falling back below the $0.70 support, potentially dropping to as low as $0.62. Such a decline would dampen investor confidence and delay any recovery, making traders more hesitant to re-engage.

The Risk of $20 Million in Liquidations

One of the more pressing concerns for traders is the potential for liquidations if ADA continues its upward movement. According to data from the Liquidation Map, if Cardano breaks through the $0.77 resistance, approximately $20 million worth of short positions could be liquidated. When short traders are forced to close their positions, this could create upward pressure on ADA’s price, potentially leading to a brief spike.

However, this potential for upward price movement does not necessarily guarantee a sustained rally. Many short traders are still holding onto their positions, waiting for a confirmation of a downward trend or a market reversal. This means that while a brief surge in price could occur if the $0.77 resistance is breached, it is uncertain whether the momentum will be strong enough to sustain it.

Declining Active Addresses and Low Participation

Another significant factor impacting Cardano’s recovery is the declining number of active addresses on the network. Recently, the number of active addresses on Cardano has dropped to a four-month low of 20,700, indicating a decrease in investor participation. This reduction in engagement is worrisome, as it suggests that ADA holders may be waiting on the sidelines for clearer signals of recovery before making any further moves.

The lack of active participation is affecting Cardano’s liquidity and transaction volume. With fewer traders engaging with the network, Cardano’s ability to generate significant upward momentum becomes more difficult. The decline in active addresses indicates a lack of confidence among traders and could lead to slower price movements unless more bullish signals emerge in the market.

Short-Term Outlook for ADA

Cardano’s current price action suggests that its recovery potential remains weak unless broader market conditions improve. ADA has held above the $0.70 support level, but breaking through the $0.77 resistance seems challenging without a clear surge in market momentum. In the absence of a significant rally, Cardano could remain consolidated below this resistance level, with the risk of falling back to lower levels if support at $0.70 fails.

If Cardano can maintain its position above $0.70 and manage to breach the $0.77 level, it could see a short-term rise to $0.85. However, without stronger investor participation and clearer signs of market recovery, ADA’s growth potential remains uncertain.

Conclusion

Cardano’s price action is at a crossroads, with the $0.77 resistance level posing a major hurdle. While the potential for $20 million in short liquidations exists, ADA’s recovery is hampered by weak market momentum and a decline in active addresses. Traders are watching closely to see if Cardano can break through key resistance levels and ignite a more sustained uptrend. However, until then, ADA’s price remains vulnerable to both downward pressure and short-term volatility.