Cardano’s (ADA) price has recently experienced a notable downturn, dropping 4.5% in just 24 hours and trading at $0.6529. This marks a 10% decline over the past week and an alarming 45% decrease from its high of $1.19 on March 2. Such a significant fall prompts an examination of the underlying factors contributing to this trend.
Several issues are presenting challenges for Cardano, leading to its underwhelming performance in the market:
-
Decreasing network activity and total value locked (TVL)
-
Negative funding rates in derivatives trading
-
A weakening technical structure
Weakening On-Chain Activity in Cardano
The downturn in ADA price can be traced to a sharp reduction in both network activity and TVL. Cardano’s daily active addresses have plummeted by over 70%, from approximately 70,700 on March 2 to fewer than 20,000 by March 31. A similar trend is observable in daily transactions, which decreased by over 71% within the same period.
The total value locked in Cardano has also seen a significant decline, dropping from $529.8 million on March 3 to $317.9 million by March 31, representing a 13% decrease in just five days. This decline correlates directly with the decrease in active addresses and transactions.
Bearish Sentiment in the Derivatives Market
Additional pressure on ADA’s price can be attributed to a lack of enthusiasm in its derivatives market. This is highlighted by a consistent downturn in funding rates, with ADA funding rates remaining below zero for the last four weeks. This negative funding rate indicates that short sellers are paying their counterparts to keep their positions open, suggesting an overwhelming bearish sentiment among traders.
Moreover, the cumulative open interest in perpetual futures across major exchanges has remained below $1.0 billion since March 4, considerably lower than January’s peak of $1.50 billion. Historically, declining open interest tends to hinder upward price momentum, as the lack of capital limits the potential for growth.
Moving Averages and Technical Analysis
From a technical standpoint, Cardano’s price movement is further hindered by significant resistance levels indicated by moving averages. The ADA price has been trapped between the 50-day simple moving average (SMA) and the 200-day SMA since early March, facing continual rejection at key resistance points. The recent decline below the 200-day SMA now converts this level into a resistance point.
The critical support level to monitor is the psychological benchmark of $0.60. A breach of this level could lead to further declines, potentially targeting the $0.5794 low from late February, and the $0.5197 low reached in November 2024.
This assessment indicates that without renewed enthusiasm from both institutional and retail investors, ADA faces significant risk for further losses moving forward.
This article is not intended as investment advice. All trading carries inherent risks, and readers are advised to conduct thorough research before making investment decisions.
