ADA has been an attractive investment since the outbreak of the pandemic in March 2020. The price surged 17,600% in less than 1.5 years to hit an all-time high of $3.11. This impressive surge has slowed significantly since the fourth quarter of 2021 and shows no sign of stopping. The drop in particular makes ADA one of the best altcoins to bet on for the next bull run.

Technical factors reveal opportunities

ADA Perpetual Futures Contract | Source: Trade View

The price has been faithful to the psychological $1 level since it was first touched on 09/02/2021. Since that time, ADA has bounced off the above barrier about 8 times, with the last retest on February 3rd. Shortly after, the price slipped below this critical level and it is currently hovering above $0.843, which is crucial.

The $0.843 support level is important for several reasons. Therefore, a breakdown of this barrier can result in ADA dropping 56% to $0.397 in what is known as the “maximum loss scenario”. There are two main reasons why such a strong and intense downtrend is expected:

Fair Value Gap (FVG): This technical setup occurs when an asset’s price moves rapidly away from a certain point, resulting in underperformance. When momentum wanes, the asset typically falls lower and fills that gap.

For ADA, the FVG ranges from $0.365 to $0.746 and was formed when ADA gained 224% between January 28, 2021 and February 9, 2021. Since the rise, Ethereum’s killer has been unable to fill this gap. Therefore, a break of $0.843 will be the catalyst that will prompt market makers to urge ADA to close the gap.

– Volume Profile Gaps: The volume profile indicator is used to identify clusters or regions that have experienced maximum trading volume. These clusters or spikes often act as key support or resistance levels that help identify potential pivot points.

For ADA, the volume profile for 2021-2022 is down significantly from $0.843 to $0.398. Furthermore, FVG is a subset of this range and supports the possibility of a larger drop to $0.398 if the $0.843 support is broken.

Interested investors can start by averaging the dollar cost of their investment at current levels and leaving some bids around $0.4.

ADA Perpetual Futures Contract | Source: Trade View

This outlook is supported by the 365-day market value to real value model (MVRV). The indicator is used to find the average profit/loss of investors who bought ADA in the past year.

Currently, the 365-day MVRV is hovering around -50%, suggesting that the majority of holders are losing money. This indicator last fell to such a low in March 2020 due to the pandemic. As mentioned above, this crash was a perfect opportunity to accumulate and hit huge wins.

Therefore, this reflects that ADA will be an altcoin to watch out for.

MVRV Rate | Source: Santiment

Let’s say ADA re-tests $0.4, showing that the downside threat has expired and a trend reversal is likely. The upleg or move higher is confirmed after ADA made a higher high above the volume checkpoint at $1,238.

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