Cardano price has crashed and moved into a bear market after falling by nearly 50% from its highest level in November. It has moved to a low of $0.6620, bringing its market cap to over $24 billion, down from $34 billion a few weeks ago.
The Wyckoff Theory was developed over 95 years ago, and it can explain the ongoing ADA price crash.
Wyckoff Theory Explains Cardano Price Crash
Richard Wyckoff launched the Wyckoff Theory or Method to explain how stocks move over time. He identified four phases, which can be seen in the recent Cardano price action: accumulation, markup, distribution, and markdown.
Each of these phases has key characteristics. Sideways movements and low volume characterize the accumulation phase.
The chart above shows that the ADA price remained within a tight range between April and November last year. The volume bars also indicate this.
Further, the Wyckoff Theory has the markup phase, where demand outweighs supply. This phase is characterized by animal spirits and the Fear Of Missing Out (FOMO), and most traders want to participate in it.
It is also characterized by high bullish volume and positive analysts’ estimates. For example, the rise of ADA ETF odds was a sign of the markup phase.
Cardano then moved into the distribution phase, which experienced significant volatility. A big drop attracts dip buyers, as some holders use the pops to sell their tokens.
ADA is in the Markdown Phase
ADA’s price has moved into the markdown of the Wyckoff Theory, which has higher supply than demand. Dip buyers often remain on the sideline as the bearish volume remains elevated.
The markdown phase has intensified after the Cardano price moved below the key support at $0.7600, its lowest level on December 20th. This was a notable level because it was the neckline of the double-top pattern at $1.15.
Cardano has moved below the 200-day Weighted Moving Average, indicating it is in the markdown phase. Worse, it has moved below the 61.8% retracement, where most reversals happen.
Therefore, the path of least resistance for the Cardano price is bearish. The next price to watch is the psychological point at $0.50, down 27% from its current level.
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