Cardano blockchain'due south native asset, ADA, reached a new tape high on Monday every bit investors pinned hopes on an upcoming smart contracts feature that expects to heave the cryptocurrency'south adoption.

The ADA/USD exchange rate topped out at $2.899 around 9:00 am UTC, raising anticipations that it would easily shut above $three in the coming sessions.

Many analysts, including pseudonymous chartist PostyXBT, noted that the Cardano token had entered a "price discovery mode." Meanwhile, David Gokhshtein hinted that ADA/USD might continue its balderdash run until Sep. 12, the day Cardano is going to integrate a smart contracts characteristic to its blockchain via the "Alonzo" upgrade.

In detail, the Alonzo upgrade introduces a native smart contracts development language called Plutus to the Cardano ecosystem. Plutus is already available for testing and brings functional programming to smart contract creation to everyday users.

As a consequence, ADA bulls anticipate the token's adoption to smash in the sessions ahead as Cardano attracts decentralized application developers — operating in the emerging decentralized finance and nonfungible token sectors — to its smart contracts ecosystem.

Overbought risks

But Cardano'due south technical indicators predict a short-term shock, something that might take the ADA/USD corrected lower by as much every bit forty% despite maintaining its long-term bullish outlook.

The Cardano token's daily relative strength index (RSI) has ventured deeper into overbought territory, at around 83. Traders consider an RSI reading above 70 as overvalued. As a effect, it prompts them to sell the nugget to secure maximum profits.

ADA/USD daily chart featuring RSI correction fractal. Source: TradingView

For instance, a run-upwardly in ADA/USD rates in the first quarter of 2022 pushed its RSI reading above 90. Subsequently, the pair started consolidating sideways while maintaining support near its 50-day exponential moving average (50-mean solar day EMA; the scarlet wave).

Related: Cardano defies Peter Brandt's 90% crash alarm, ADA toll doubles to new high

ADA's cost now sits atop 114% month-to-date and 1,511% twelvemonth-to-date profits. At the aforementioned time, an oversold RSI pictures an interim profit-taking scenario. Then if the Q1/2021 fractal repeats, ADA'due south adjacent line of back up comes to exist near its 50-day EMA at $1.73, almost 40% below the electric current prices of $ii.83.

But a correction won't necessarily exhaust Cardano'due south long-term bullish outlook. Given the potential success of its Alonzo upgrade, the project could finish up attracting more speculative upside bids for its ADA token. As a event, the ADA/USD exchange charge per unit expects to remain in price discovery fashion.

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