Cardano (ADA) surged 23%: A solid advance or just a short term bounce?

As of now, Cardano (ADA) has risen to the sky by 3.52% in just 24 hours, bringing the total profit over the past week to more than 23%. This impressive bounce back momentum has pushed ADA into a high-profit zone — however, that joy may not last long.

Technical indicators are sending warning signals as ADA approaches the overbought zone, while market sentiment begins to show caution, with many investors getting ready to take profits. These movements indicate the possibility of a short-term correction before ADA establishes its next trend.

Does taking profit trigger the next drop?

At the time of writing, the unrealized profit and loss index (NUPL) of Cardano remains clearly in the positive zone, reflecting that the majority of investors are in a profitable state. However, historical market data has shown multiple times that when the percentage of profitable investors becomes too high, the trend of taking profits is often triggered – leading to inevitable price corrections.

Source: AlphractalThe recent rise to the sky of ADA is raising concerns that the distribution phase – when investors gradually sell to realize profits – may be starting.

Expert Joao Wedson from Alphractal has also issued a warning, suggesting that ADA is likely to enter a short-term correction before bouncing back and breaking above the $3 mark in October or November. According to him, the target price could reach $4.90.

Source: TradingView/Joao Wedson## TVL rise to the sky – Sign of confidence or a selling trap?

The decentralized finance space (DeFi) of Cardano is witnessing notable movements, alongside fluctuations on centralized exchanges – a sign that the market may be preparing to enter a new phase full of potential.

According to data from DeFiLlama, the Total Value Locked (TVL) of ADA in DeFi protocols has increased by 3.44% in just the past 24 hours. This is often seen as a positive signal, as an increase in TVL means that investors are locking their assets to earn rewards – reflecting confidence in the long-term prospects of the asset.

Source: DeFiLlamaThe recent achievement of a TVL of 313.75 million USD further reinforces the view that long-term investors are looking to optimize passive returns from ADA, even as this coin may be entering a distribution phase.

The tug-of-war between the bulls and the bears? Not necessarily.

Investor sentiment in the derivatives market is becoming polarized, although the bulls are still temporarily in control.

Data from Coinalyze shows that the total liquidation value of Long and Short positions in the derivatives market is almost balanced, with about 4.9 million USD being "wiped out" on both sides – a sign that investors are still lacking a clear direction regarding the next trend of ADA.

Source: CoinalyzeHowever, the Long/Short ratio reveals a positive point: the optimistic sentiment is still prevailing. Specifically, buy orders account for up to 76.22% of the total trading volume, while sell orders only account for 23.78% – creating a clear advantage for the bulls.

However, if the pressure to take profits or panic selling increases, this situation could quickly reverse, putting Long positions in a vulnerable state.

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