Cardano (ADA) has had a rough week. It dropped more than 20%, from highs around $0.80 to roughly $0.65 as of this writing, amid increased market volatility. This drop, which caused the cryptocurrency to suddenly plummet to less than $0.30 on some exchanges, is a sign of problems in the crypto market as a whole and also troubles particular to the Cardano network. This massive drop, which came after a period of stability, has understandably worried investors and led to doubts about […]
Cardano (ADA) has had a rough week. It dropped more than 20%, from highs around $0.80 to roughly $0.65 as of this writing, amid increased market volatility. This drop, which caused the cryptocurrency to suddenly plummet to less than $0.30 on some exchanges, is a sign of problems in the crypto market as a whole and also troubles particular to the Cardano network.
This massive drop, which came after a period of stability, has understandably worried investors and led to doubts about how strong one of the crypto market’s oldest Layer-1 networks is.
It looks like the main reason for the selloff was an event on October 10 that was linked to rising political rhetoric in the U.S., which included threats of a new tariff war against China. This caused a huge $19 billion in crypto liquidations across the board, causing ADA’s collapse worse as traders unwound leveraged positions.
Whales were a big part of the problem, selling almost 40 million ADA tokens last week, which made prices go down even further and caused retail investors to panic sell. Also, different exchanges had various challenges with liquidity. For instance, Bitfinex dropped to $0.30, but Coinbase stayed around $0.60, showing how fragmented the market was.
Cardano has excellent fundamentals, a peer-reviewed process, and a passionate community, but it has had trouble keeping up with the fast speed of ecosystem acceptance that some of its competitors have seen. ADA has fallen behind Ethereum (ETH), Solana (SOL), and Ripple (XRP) since there hasn’t been as much activity on the blockchain and there haven’t been any immediate triggers like ETF approvals.
Also, investors sentiment towards Cardano has been weakened because it doesn’t have a “killer application”. In addition, its Total Value Locked (TVL) in the Decentralized Finance (DeFi) sector has been slow to grow. Selling pressures are amplified in a risk-off market because investors flee assets with slower growth trajectories for those with greater immediate utility or acceleration.
Cardano chain’s DeFi TVL has declined by more than 15% in the last week and over 19% in the last month, ranking it 24th. Source: DeFiLlama
On the technical side, the most important thing that needs to happen right away is for dip-buyers and whales to protect important support levels. Assuming ADA reclaims important moving averages such as the 50-day or 200-day Exponential Moving Average, the selling pressure will likely ease.
As seen on the chart below, Cardano price is currently on a bearish momentum, with the RSI at 37.73 nearing oversold conditions. A return above the Volume Weighted Moving Average (VWMA) at $0.7575 could build traction for a reversal. The rebound must be followed by an increase in trade volume to prove that buyers are confident of their decision.
It’s also important that Bitcoin stays stable. ADA’s near-term growth depends on BTC resisting pressure to break below $110k, since altcoins usually follow the market leader. A big jump from where we are now might bring back prices from before the crash. However, this would need breaking through key resistance levels at $0.70, $0.78, and $0.85. That said, upcoming updates, like Hydra to speed up transactions, could be what gets people interested again and gets them to do more on-chain.
Ultimately, utility is the strongest and most resilient driver of price. Cardano needs to witness a big rise in the number of active Decentralized Applications (dApps), a breakout in its DeFi TVL, and, if possible, a few major, well-known partnerships in the real world.
This article was originally published on InvestingCube.com. Republishing without permission is prohibited.
