Alarming Signal for Cardano
Several key indicators show a significant slowdown in activity on the Cardano network in recent weeks:
- The number of daily active addresses has dropped by over 70%, from 70,700 on March 2 to less than 20,000 on March 31.
- The number of daily transactions has also decreased by over 71% during the same period.
- The Total Value Locked (TVL) on Cardano plunged from $529.8 million on March 3 to $317.9 million on March 31, a decline of 13% in just 5 days.
This waning user interest and liquidity reduction on the blockchain align with the recent drop in ADA’s price.
Bearish Signals in the Derivatives Market
The lack of enthusiasm in Cardano’s derivatives market is another factor weighing on ADA’s price:
- Funding rates have remained negative for the last 4 weeks, indicating the dominance of bearish positions.
- The cumulative open interest on perpetual futures contracts has stayed below the billion-dollar mark since March 4, well below the peak of $1.5 billion reached on January 18.
Historically, assets with declining Open Interest (OI) struggle to maintain an upward momentum due to insufficient capital and enthusiasm to drive prices higher. ADA may face further losses without renewed interest from institutional or retail traders.
A Fragile Price Structure
Technically, Cardano remains entrenched in a downtrend initiated when the price was rejected from a major resistance zone in early March:
- ADA’s price has been trapped between the 50 and 200-day moving averages from March 9 to 27, with each recovery attempt being pushed back by the 50-day MA at $0.7531.
- On March 28, the price dropped below the 200-day MA at $0.7262, turning it into resistance.
The next support level to watch is around the psychological threshold of $0.60. If it breaks below this level, ADA may then target the range between $0.5794 (February 28 low) and $0.5197 (November 13, 2024 low).
ADA’s token has broken its uptrend line. An uptrend line forces investors to go long below. These trendlines are used by smart money to force selling, in this case, to accumulate at lower prices. ADA must bounce between $0.57 and its current price of $0.63, or risk invalidating a rebound in the coming days.
Despite Cardano’s project ambitions, its price currently seems trapped in a challenging downtrend. The decline in activity on the network, negative signals in the derivatives market, and the technical fragility of ADA’s price structure are worrisome factors to monitor in the coming weeks. Investors should exercise caution in the face of this volatile situation.
