The cryptocurrency market is undergoing a significant correction, shedding over $500 million in liquidations within a single day and pushing the total market capitalization below $3.4 trillion, effectively erasing the gains achieved earlier in the year. Cardano (ADA), a prominent altcoin, has been particularly affected, experiencing an 8% drop in value in 24 hours, reaching $0.89 at the time of analysis. This decline reflects a broader downward trend for ADA, exacerbated by resistance at key price levels and increasingly bearish technical indicators. The confluence of these factors paints a concerning picture for the cryptocurrency’s short-term prospects.
Several on-chain metrics underscore the challenges facing Cardano. User activity has plummeted since early December, with daily active addresses and transactions significantly declining. This drop in engagement raises concerns about the network’s health and future growth potential, potentially contributing to the downward pressure on ADA’s price. Furthermore, the total value locked (TVL) in the Cardano DeFi ecosystem has suffered a substantial decline, exceeding 31.5% since early December. A sharp $105 million drop in TVL within a 72-hour period highlights the accelerating exodus of capital from the Cardano network, further amplifying the bearish sentiment.
Cardano’s price movement has closely tracked that of Bitcoin (BTC), indicating a strong correlation between the two assets. This correlation suggests that if Bitcoin’s correction continues, ADA is likely to experience further declines given its already weakened technical standing. Adding to the market uncertainty is the looming liquidation of approximately 69,370 BTC seized from the Silk Road marketplace by the US government. This impending sale introduces a significant supply of Bitcoin into the market, potentially exacerbating downward pressure on both BTC and correlated assets like ADA. The political backdrop further complicates the situation, with differing stances between the outgoing and incoming US administrations regarding the sale of seized cryptocurrencies.
Technical analysis of the ADA/USDT trading pair reveals resistance around the $1.30 level and a slide towards the $0.75 support level. A breach of this support could trigger further declines towards the 200-day moving average near $0.55. Similarly, the ADA/BTC pair shows a consolidation pattern, with the 900 SAT level acting as crucial support. A breakdown below this level could send ADA tumbling towards the 200-day moving average around 700 SAT or even lower. These technical patterns suggest a potential for extended downward movement for ADA if the overall market sentiment remains negative.
Analysts are increasingly pessimistic about ADA’s short-term prospects, citing technical indicators that point to continued weakness. One analyst highlights the significance of the $0.92 level, recommending caution for traders considering long positions until support is confirmed around $0.85. A failure to hold this support could lead to a drop towards the 200-week simple moving average (SMA) at $0.763, with the psychological $0.60 level as a potential target in a continued downturn. The declining relative strength index (RSI), dropping from 63 to 44 in three days, indicates mounting selling pressure, further supporting the bearish outlook for ADA.
In summary, Cardano is facing multiple headwinds, including declining user activity, diminishing TVL, a broader crypto market correction, and increasingly bearish technical indicators. The correlation with Bitcoin’s price movement exposes ADA to further downside risk should Bitcoin continue its correction. The potential liquidation of a large quantity of seized BTC further adds to the market uncertainty and downside pressure. Technical analysis suggests that a breach of key support levels could trigger a cascade of selling, potentially leading to a significant decline in ADA’s value. Analysts’ warnings coupled with weakening technical indicators paint a bleak picture for Cardano in the near term, suggesting that further downside is a strong possibility.
