Cardano's ADA Faces Significant Drop Amid Weak On-Chain Metrics and Market Downturn
Summary:
Cardano's token (ADA) experienced a significant drop during the cryptocurrency market downturn on April 10, falling to an intraday low of $0.558. This decrease is linked to weak on-chain metrics, including a drop in trading volume and the number of active developers. The downturn also corresponds with a 27% price drop for ADA. Technical analysis suggests ADA's price correction is part of a wider corrective cycle, with a potential for further downside. ADA's recovery may face resistance, as evidenced by recent price corrections and on-chain data.
The recent upheaval in the cryptocurrency market on April 10 saw Cardano's own token (ADA) bear a significant chunk of daily losses. Cointelegraph Markets Pro and TradingView data shows that the price of ADA plunged to a low of $0.558 that day, marking a 3% decrease over the past day. Let's examine the factors contributing to ADA's today's depreciation.
Data from Token Terminal highlights a correlation between the fall in the ADA price and a slight decrease in its trading volume and the number of main developers. Specifically, the distinct daily GitHub users who contributed more than once to the blockchain's public GitHub repository fell from a 90-day peak of 146 developers on March 6 to 122 on April 10, indicating a 16.5% drop.
ADA's daily trading volume contrasted with main developers. Source: Token Terminal
The transaction volume, within the same period, dipped by 80.7%, from roughly $2.189 billion to $421 million. Further data from DefiLlama points to a drop in the total value locked (TVL) on the Cardano network from $473.33 million on March 16 to $371.51 million on April 10.
Total Value Locked in USD in Cardano. Source: DefiLlama
These metrics relating to trading volume, active developers, and total value locked seemingly have a causal relationship with the decrement in ADA’s price by 27% over the same period, suggesting their influence over ADA’s short-term price movements. April 10 was no exception.
ADA's market structure appears fragile from a technical standpoint. ADA's ongoing price correction is part of a larger corrective cycle that began in mid-March, following the token's rise to a two-year high of $0.81. Traders began to profit as the relative strength index (RSI) for ADA on the daily chart crossed the 70 threshold, indicating an overbought scenario.
An RSI reading exceeding 70 signifies an overvalued asset that may be poised for a trend reversal or a corrective drawback.
ADA is currently on a longer-term downtrend that is backed by its sagging trajectory within a falling parallel channel. The RSI is currently at 48, pointing to a market environment that's primarily bearish.
Looking ahead, ADA's price recovery journey looks challenging. Recent corrections in ADA price show traces of further weakness after failing to break past the upper boundary of the descending channel at $0.61, thereby affirming a substantial resistance at this level. If the bulls cannot convert this level into a support, ADA's possibility of extending its current downtrend increases. This bearish prognosis is supported by on-chain data from IntoTheBlock.
Cardano's IOMAP (In/Out of the Money Around Price) model shows that the channel's upper boundary at $0.61 lies just above the $0.58 to $0.60 price range—a range where approximately 2.17 billion ADA was earlier purchased by around 132,970 addresses—an obstacle robust enough to hold off any buying pressure aimed at elevating the ADA price. For ADA to avoid further losses, bulls will need to turn this zone into a support.
Remember, this news does not comprise investment advice or recommendations, and all investment and trading moves carry risk. Readers are encouraged to carry out their own research before making any decisions.
Published At
4/10/2024 11:34:04 PM
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