Cardano (ADA) has caught the attention of the crypto community after a sudden 7% surge in price this week. With sentiment in the market shifting quickly, many investors are now wondering: is this the start of a real recovery, or simply a deceptive bounce before another major downturn?

The rally comes at a critical moment for ADA. The cryptocurrency had suffered a steep 12.6% decline over the past month, pushing it below key support levels and rattling investor confidence. Despite this, Cardano is still up over 87% from its election-day opening price—a sign that many long-term holders remain in profit. This might sound like a reason to celebrate, but the data paints a more complicated picture.

While ADA’s short-term price action may suggest strength, on-chain fundamentals are flashing warning signs. One of the most concerning indicators is the Market Value to Realized Value (MVRV) ratio. This metric recently turned negative, which means that the average ADA holder who bought in the recent past is now at a loss. Historically, a negative MVRV ratio has preceded periods of selling pressure, as traders move to cut losses before prices fall further.

At the same time, Cardano’s Total Value Locked (TVL)—a measure of how much value is currently held within its decentralized finance (DeFi) protocols—has declined significantly. The TVL has now dipped below pre-election levels, signaling that capital is flowing out of Cardano’s ecosystem. This drop raises concerns about weakening network activity and diminishing interest from developers and users alike.

Adding to the uncertainty, ADA’s price recently broke below the $0.58 level, a crucial support that had held strong for months following the election. Since February, the asset has posted three consecutive lower lows, a bearish technical pattern that suggests continued structural weakness. Although ADA has since rebounded above $0.62, the failure to hold key support levels highlights ongoing vulnerability.

However, the picture isn’t entirely bleak. On April 10, large ADA holders—wallets containing between 100 million and 1 billion tokens—accumulated roughly 250 million ADA. This uptick in whale activity helped fuel a short squeeze that liquidated nearly $1 million in short positions. That, combined with a spike in trading volume (which nearly doubled to $1.98 billion in just one day), helped fuel the recent price rebound.

Still, caution is warranted. The largest whale cohort—those holding more than 12 billion ADA—remains inactive. Moreover, dormant ADA that has sat unmoved for over 180 days is now being circulated again, a historical indicator that a local market top may be near. When long-held coins start moving, it often signals that early investors are preparing to exit, which can increase downward pressure on price.

So, what does all of this mean for Cardano in the near term?

While the recent rally may provide a glimmer of hope, ADA remains at a critical juncture. To establish a genuine bullish trend, Cardano needs to reclaim key technical levels, attract more user engagement across its DeFi ecosystem, and see continued accumulation by large investors. Without these developments, this rebound could be short-lived.

For now, investors are advised to remain cautious. Although ADA’s price spike may have shaken off some bearish momentum, the underlying fundamentals have yet to fully support a long-term rally. The risk of another downturn is still present, especially if market sentiment shifts or if broader crypto trends turn negative.

In conclusion, while Cardano’s recent price action has reignited interest, it’s far from a confirmed comeback. For ADA to prove the bulls right, it must back up price movements with stronger on-chain performance. Until then, this could be just another deceptive bounce in an otherwise shaky market.