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Cardano (ADA) traded within striking distance of its three-week high this at the start of this week, leading some investors to suggest that a trend reversal was in order. In reality, the bullish momentum is primarily connected to anticipation of the upcoming decentralized exchange (DEX) called SundaeSwap.

ADA price rose by nearly 12% on Jan.17 to reach an intraday high of $1.60, a day after SundaeSwap announced the launch of its “fully-functional beta decentralized exchange (DEX).” Nonetheless, the upside swing also came as a part of a wider rebound trend wherein ADA jumped by almost 50% in just seven days.

ADA/USD daily price chart. Source: TradingView

In detail, ADA’s rebound began almost in sync with similar retracement moves across the cryptocurrency market. That included Bitcoin (BTC), which sharply reversed its trend on Jan. 10 after its price dipped to as low as $39,650. At press time, BTC price trades at $41,500.

ADA initially tailed the crypto market’s reversal, but later continued its upside momentum on its own after taking cues from the euphoria surrounding the SundaeSwap DEX launch on Jan. 20. As a result, the ADA emerged as one of the best performers among the top-ten cryptocurrencies based on a 24-hour adjusted timeframe.

Top 10 cryptocurrencies in the past 48 hours. Source: Messari

What makes SundaeSwap bullish for ADA?

SundaeSwap’s official DEX launch announcement included evidence of greater demand for ADA tokens in the future and this is typically a bullish signal for investors.

The DEX platform also introduced its native SUNDAE token and discussed three ways to distribute it among users: via an initial stake offering (ISO) round, yield farming, and direct exchange-based conversion. 

Discussing the ISO round, SundaeSwap explained that it would distribute 5% of the total SUNDAE supply via five epochs. Each epoch represents a five-day reward cycle wherein users delegate their ADA tokens into a stake pool.

“If you want to make sure you qualify for all five ISO reward rounds, you must have ADA staked with eligible SPOs [Stake Pool Operators] before 21:45 UTC on January 25th,” the DEX’s announcement read, adding:

“Your reward will be calculated based on the snapshot taken at that time, and at the same time at each subsequent epoch boundary.”

Meanwhile, the yield farming program saw SundaeSwap adding four ADA-based liquidity pools: SUNDAE/ADA, LQ/ADA, WMT/ADA, and CARDS/ADA. The DEX also allocated 500,000 SUNDAE per day from January through June.

ADA to $2?

The SundaeSwap-led bounce pushed ADA toward its 100-day exponential moving average (100-day EMA; the blue wave) near $1.57.

ADA/USD daily price chart featuring 100-day EMA resistance. Source: TradingView

Additional bullish cues have also been coming from the anticipated launch of Pavio, Cardano’s first metaverse undertaking.

Pavio is a Decentraland-like virtual land startup with some 100,000 land parcels, each being minted as a unique nonfungible token (NFT) with coordinates. The advent of a the Metaverse in the crypto sector in the past months and Cardano’s involvement in it may boost demand for ADA further.

Related: Meta poaches staff from Microsoft and Apple for metaverse plans

This raises the possibility for Cardano to close above its 100-day EMA resistance wave, thus shifting the next upside target toward the 200-day EMA near $2.

Conversely, risks of an overall crypto market crash led by the U.S. Federal Reserve’s tapering programs this year could spoil ADA’s bullish setup to an extent. 

“While ADA is far from its peak, the prospect of obtaining more scalability as part of its 2022 roadmap explains why investors appear to be betting big on Cardano. This point was also noted by Liam Bussel, the CMO of Cardano-native DEX WingRiders in a statement to Cointelegraph.

Bussel said,

“In a world characterized by high performance and novel use cases, Cardano will be able to keep up and lead the pack. As a result, a weekly closing above $1.80 is likely, barring any last-minute profiteering by sellers.”