Decoding Cardano's (ADA) Market Performance Amidst Crypto Market Correction
Summary:
Cardano (ADA) is undergoing a correction phase prompted by overvaluation signs in mid-December 2023. The declining parallel channel and the 40 RSI reading underscore the bear faction dominance in Cardano's market. Moreover, a slight reduction in the token's trading volume and original developers since mid-December has coincided with ADA’s 27% price drop, suggesting these factors impacted ADA's short-term pricing trends. The broader crypto market correction, indicated by diminished Crypto Fear and Greed index and increased spot Bitcoin ETF-driven selling, has contributed to the ADA’s slump.
Daily Cardano/USD chart. Source: TradingView. Let's examine the factors contributing to Cardano's recent slump in price.
Overextended dip due to heightened selling conditions
The current reduction in ADA’s value can be understood as a phase of adjustment that commenced in the middle of December, following ADA’s leap to a 20-month apex at $0.68. In response to the relative strength index (RSI) indicating that ADA was in oversold territory by exceeding 70, traders opted to secure their profits. A compelling RSI figure of over 70 typically signals that an asset is approaching overvaluation, inciting the possibility of a major price shift or withdraw.
Daily Cardano/USD chart. Source: TradingView
Cardano is presently experiencing a decline, confirmed by the downward trajectory within a declining parallel channel. The RSI currently stands at 40, conveying the market atmosphere where the bearish market players are dominating.
Shrinking original developers and trade volume
The slump in ADA's current price since mid-December corresponds to a marginal decrease in the currency’s trade volume and the count of main developers, as indicated by TokenTerminal data. Daily ADA volume of transactions versus primary developers. Source: TokenTerminal.
Interestingly, the daily unique GitHub contributors who committed more than once to the blockchain’s open GitHub repository dropped from a 90-day peak of 164 developers on December 10, 2023, to 123 on January 18, indicating a 25% contraction. In the same interval, the transaction volume witnessed an 87% cutback, tumbling from around $2.34 billion to $304 million. Supplemental CoinMarketCap statistics reveal that ADA’s trading volume each day plummeted from roughly $1.165 billion on December 10, 2023, to $381 million on January 18. The simultaneous decline in trading activity and primary developers aligns with ADA's descent of 27% in price over the equivalent period. These stats appear to have had an impact on ADA's short-term pricing trends, and January 19 is no exception.
Relevant: Price analysis 1/15: SPX, DXY, BTC, ETH, BNB, SOL, XRP, ADA, AVAX, DOGE. Broader crypto market downturn.
The expansive cryptocurrency market is undergoing an adjustment from its apex alongside the approval of spot ETFs, and ADA reflects a similar trend. The dwindling Crypto Fear and Greed index and the sale driven by spot Bitcoin ETF may have encouraged traders to offload their holdings.
Daily Performance chart of Crypto market cap. Source: TradingView
Significantly, Bitcoin has been subjected to profound selling pressure recently, with BTC's price plunging to $40,000 on January 12. This mainly emerged from sizable outflows from the Grayscale Bitcoin Trust (GBTC), which could be an indication of investors opting for lower-fee Bitcoin ETFs. As Bitcoin plummeted, the overarching crypto market followed suit, with prominent altcoins like ADA trailing the dip. The Crypto Fear and Greed index moved from the "greed" zone last week to "neutral" on January 19. Crypto Fear and Greed Index. Source: Alternative.me
The present market-wide correction could be attributed to the declining confidence in the bullish market. The "neutral" value indicates a sense of circumspection among market participants as they contemplate the market's short-term direction.
This article does not constitute investment advice or endorsements. Each investment and trading decision entails risk, so readers should carry out their own inquiries before making a decision.
Published At
1/20/2024 12:15:02 AM
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