The price of Cardano (ADA) fell 7.25% to $0.474 on May 22, two days after cryptocurrency analyst Justin Bons criticized the blockchain project for being extremely centralized.
Bons claimed in 2015 that Cardano’s parent company, Input Output Global (IOG), controls five of the blockchain’s seven “genesis keys,” which are cryptographic keys used to sign and establish initial blocks on the Cardano blockchain.
“Genesis keys allow code changes to be pushed seamlessly without a hard fork,” the analyst added.
“This means IOG can stop the chain, change emissions schedules, censor, and much more. This is an unprecedented level of centralized control over the L1 chain.”
ADA’s decline following Boggs’ comments triggered a bearish setup that could lead to another 30% price slump by June.
ADA risks a triangle collapse in the future.
Cardano’s ongoing correction occurs after it reaches the familiar descending trendline resistance, which is part of a common symmetrical triangle pattern.
A downtrending symmetrical triangle is considered a bearish continuation pattern and is characterized by the formation of two converging trend lines, one rising and the other falling. According to the rules of technical analysis, this pattern is resolved after the price falls below the lower trend line and falls by the maximum triangle height.
As of May 22nd, the price of ADA has corrected after testing the upper trendline of the triangle. A prolonged pullback is now expected towards the lower trendline of around $0.44 by the end of May, a 6.5% decline from current price levels.
A decisive symmetrical triangle collapse could push the price of ADA down to the $0.336-0.366 area, approximately 20-25% from current price levels, depending on the point of the collapse.
On a more positive note, the price of ADA is bouncing back after testing rising trendline support for several months.
A broader rally is possible if the price breaks above the 50-3D (red wave) and 200-3D (blue wave) exponential moving averages (EMA). In this case, the initial upside target for ADA would be around $0.67, an increase of about 35% from current price levels.
The $0.67 level served as resistance in December 2023 and May 2022.
Cardano whales are accumulating
Cardano’s ongoing price correction coincides with a small increase in the supply of ADA held by the wealthiest addresses. This indicates that these whales ignored Bogs’ warnings about Cardano’s so-called centralization.
For example, companies holding 10-100 million ADA (black) and 100-1 billion ADA (turquoise) tokens have seen their holdings increase over the last 24 hours. This trend shows that most whales are buying dips in prices in hopes of making further profits.
Broadly speaking, the 10-100 million cohort shows a sharp increase in ADA holdings around the end of March, followed by some stabilization. Meanwhile, the 100 million to 1 billion cohort has steadily increased, especially noteworthy since mid-March.
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During this period, the price of ADA has fallen by more than 20%, suggesting that most Cardano whales expect the price to rise further in the long term.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.