Cardano (ADA) has been one of the most exciting cryptocurrencies in recent weeks, showing impressive gains of 264% over the past month. However, the ADA price is now facing a significant resistance level at $1.20, which could act as a pivotal point for its future price action. This resistance has raised concerns that the asset might be reaching the peak of its current rally, and that a pullback may be imminent unless the price can break through this barrier.

One of the key factors affecting Cardano’s price action is the Market Value to Realized Value (MVRV) ratio, which is currently above historical levels. The MVRV ratio compares the current market value of an asset to the realized value, showing whether holders are in profit or loss. When the MVRV ratio is higher than usual, it suggests that a significant portion of the holders are in profit. This increases the likelihood of profit-taking, which could result in a pullback or correction in the price.

Cardano’s MVRV ratio is currently signaling that the market may be overvalued, which increases the risk of a short-term price drop. Historically, when the MVRV ratio has surpassed certain thresholds, corrections have often followed. With the current ratio above this level, it’s important for investors to remain cautious, as Cardano could be due for a short-term decline, especially if the broader market sentiment shifts.

Moreover, Cardano’s price movements are still largely influenced by the overall direction of the cryptocurrency market, especially Bitcoin (BTC). ADA and Bitcoin have shown a strong correlation, with a current correlation coefficient of 0.88, indicating that Cardano’s price is often driven by Bitcoin’s performance. With Bitcoin recently hitting a new all-time high above $100,000, there is potential for Cardano to continue benefiting from Bitcoin’s bullish momentum.

However, the key level to watch for Cardano in the coming days is the $1.20 resistance. If ADA can break through this level and establish support above it, this would signal continued upward momentum, potentially pushing the price towards $1.50. A sustained move above $1.20 could attract more buyers, further fueling the rally and potentially leading to new all-time highs for the asset.

On the other hand, if ADA fails to surpass the $1.20 resistance and starts to experience selling pressure, the price could face a significant pullback. In such a case, the support level around $1.01 would become a crucial area to watch. A failure to hold this level could lead to further downside, and the asset could enter a consolidation phase, which may extend for some time before a new trend emerges.

In conclusion, Cardano is at a critical point in its price action. The asset has experienced impressive gains, but the $1.20 resistance is now posing a significant challenge. With high MVRV levels suggesting a potential for profit-taking, the next few days will be crucial in determining whether Cardano can break through this resistance or if the market will cool off. Investors should keep a close eye on Bitcoin’s performance, as its movements will likely continue to influence ADA’s price trajectory in the near term.