As an analyst with over two decades of experience in the crypto market, I’ve seen my fair share of bull runs and bear markets. Looking at Cardano (ADA) today, it seems we might be heading back into a wintery landscape. The 7.4% drop over the last 72 hours is a stark reminder that even the most promising coins can feel the chill of market sentiment shifts.
Over the past three days, Cardano’s price has shown a decline, dropping by 7.4%. As of October 25th, it is being traded at approximately $0.338.
The decrease in price for ADA on October 21 has reversed all the progress it had made on Sunday, October 20, due to a change in investor opinion concerning this layer-1 token. Over the past 24 hours, ADA has declined by 2.3%.
ADA’s drop mirrors the bearish cloud that continues to engulf many altcoins in the market.
As a crypto investor, I’ve noticed that Ether (ETH), the top altcoin by market cap, has dipped around 2% over the past 24 hours, whereas Avalanche (AVAX) has seen a 2.7% decrease in its value during the same timeframe.
Let’s look at the catalysts driving ADA price down today.
ADA price hits all-time lows against Bitcoin
In the year 2024, Cardano (ADA) has not kept pace with Bitcoin (BTC). While Bitcoin has surged around 52% so far this year, Cardano has experienced a decrease of about 43% when compared to their USD values.
Due to the downtrend, ADA has been losing value compared to Bitcoin in the year 2024, which has diminished the faith of investors in the token.
During the 2021 bull market, increased network activity and overall favorable market sentiment propelled the ADA/BTC ratio to surge by approximately 895%, rising from 0.00000588 on December 21, 2020, to a peak of 0.00005847 on August 23, 2021 – marking a new record high.
After that point, the proportion plummeted significantly, decreasing by approximately 91.6%, falling to nearly its all-time lowest value of $0.00000503 on October 25th.
In simpler terms, the lackluster performance of Cardano might be due to decreased usage on its network, which in turn lowers the desire for ADA tokens within the system. This reduction in demand often results in a drop in the token’s price.
Reducing network activity underpins ADA price
Over the past six months, there’s been a significant decrease in user activity observed within the Cardano network. As per data from IntoTheBlock, the number of active addresses on the Cardano blockchain has fallen sharply – from approximately 71,270 on March 6 to around 25,680 at present.
Similarly, new addresses have declined from 24,860 wallets to 5,920 over the same period.
Fresh insights from DefiLlama indicate that the combined worth secured (TVL) within Cardano’s DeFi ecosystem has been gradually decreasing for approximately half a year now.
The graph indicates a significant decrease, more than 55%, in Total Value Locked (TVL) from around $480.72 million in March to roughly $214.8 million as of publication date.
This drop in network TVL is not solely confined to the Cardano blockchain. The total value locked in DeFil protocols built on Cardano has also contracted significantly, as shown in the figure below.
In Cardano’s DeFi landscape, Indigo’s collateralized debt protocol is particularly notable, experiencing a decrease of 15% in Total Value Locked (TVL) during the past month. Meanwhile, the decentralized exchange Minswap has also observed a drop of 11% in TVL over the same period, currently sitting at approximately $50 million.
Reduced usage on the Cardano network, along with a drop in Total Value Locked (TVL), suggests less user engagement, waning interest in ADA tokens, and potentially driving down their value due to lower demand.
ADA’s bearish divergence
Today’s decrease in ADA’s price is followed by an expanding disparity, or bearish divergence, when compared to its Relative Strength Index (RSI).
Significantly, the value of ADA increased from September 17 to October 20, creating higher minimum points. However, during this timeframe, its Daily Relative Strength Index (RSI) also decreased, resulting in lower minimum points.
In simple terms, when the price continues to increase while the Relative Strength Index (RSI) is decreasing, this situation is known as a divergence. This divergence signals potential weakness in the current upward trend, encouraging traders to offload their holdings at higher prices.
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2024-10-25 15:22