Cardano (ADA) is currently experiencing a downward trend amidst concerning signals from its ecosystem. A significant drop in DeFi TVL and low stablecoin adoption pose major challenges for the third largest blockchain protocol. What impact will this have on investors and developers ?
Data from DeFiLlama shows that the Total Value Locked (TVL) on Cardano has dropped by 15% over the last 30 days, reaching just $324 million. Only eight dApps in the ecosystem have a TVL exceeding $10 million, indicating that the network is struggling to attract investors and developers.
Moreover, Cardano’s stablecoin supply has remained stagnant at $30 million in recent months, a negligible figure compared to the stablecoin industry valued at over $250 billion. Even worse, several Cardano stablecoins have lost their peg to the dollar.
However, according to McJared, these signals might be misleading for a Cardano ecosystem with a booming Liquid Staking sector. In this particular area, Cardano significantly outperforms its competitors.
Charles Hoskinson and his team at Input Output are working on several initiatives to strengthen Cardano’s ecosystem growth. They’re developing Leios, a network update that will introduce parallel processing to increase throughput. Another initiative, Midnight, is a layer-2 network using zero-knowledge proofs (zkp) to enhance transaction privacy.
While promising, it remains uncertain whether these initiatives will succeed in attracting more developers to Cardano, as competitors like Unichain, Sonic, Sui, or Berachain continue to gain traction.
On the technical front, Cardano’s daily chart indicates bearish momentum. ADA’s price fell below its 20-day MA yesterday before recovering it this morning, currently trading at $0.58.
According to the Mean Reversion Channel, if Bitcoin continues its upward trajectory, ADA could reach the resistance zone at $0.8 in the coming weeks. This represents a potential increase of 40%.
In the shorter term, the resistance zone between $0.61 and $0.65 must be maintained as support to attempt breaking through the $0.7 level.
Additionally, Cardano has formed an inverted cup pattern, a technical signal for bearish continuation. Currently in the “handle” section of this pattern, a break below the lower support could pave the way for potential declines to the 78.6% retracement level at $0.50.
Warning signals are mounting around Cardano, with sharply declining DeFi TVL, low stablecoin adoption, and a bearish technical pattern. Although Input Output’s team is working on promising initiatives, it’s difficult to predict whether they’ll be enough to energize the Cardano ecosystem against competition from newer blockchains.
Nevertheless, the 12H RSI has reached extreme oversold levels. The worst appears to be over for Cardano. Now it remains to be seen whether buyers will step in or gravitate toward currently dominant altcoins like XRP or Solana.
Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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