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Highlights
- Cardano price double top reversal pattern on the weekly still has room for downward movement.
- Increased TPS with reducing transaction count signal reduced network activity.
- Cardano TVL has taken a hit dropping from $490M to $181M.
Cardano price has shown incredible spike in buying pressure in last two weeks, resulting in a 20% rally. Despite the recent gains, the price of ADA still risks a crash to $0.2, as macro technical analysis indicates. Can bulls prevent this drop?
3 Reasons Why Cardano Price Could Crash
Cardano network has been putting effort, but the project faces strong criticism from crypto community for delaying major upgrade. Similarly, here are 3 reasons ADA price could drop to $0.2:
- Increased transactions per section (TPS) with reduced transaction count.
- Consistently dropping total value locked since March 2024 highs.
- Reducing daily active users with stagnant network density
Surging TPS, Falling Usage
A dive into Cardano network activity reveals the blockchain needs help onboarding users despite building the capacity to scale and handle many people. According to Cexplorer, Cardano TPS has been increasing, but transaction count has been dropping, which seems counterintuitive.
The divergence in these two metrics suggests a reduced network activity, which is bearish for the Cardano price. While the network itself could be pristine, users could be demotivated by crypto market conditions or other external events.
With lower TPS, the long queue of transactions can give the notion that a network has a higher transaction count. However, when the TPS is increased, there are little to no lagging transactions, which helps to get a clearer picture of whether the network has users.
Cardano TVL Is Steadily Dropping
The Cardano TVL has been steadily dropping from March 2024 highs, when there was a mini-bull run. The spike in TVL during that time was expected as new users were potentially entering the market due to the approved Bitcoin ETF. However, in the following market correction, Cardano could not maintain its users.
TVL dropped from $490 million in March to $181 million in August, suggesting investors have been slowly pulling funds from the Cardano ecosystem.
Daily Active Users Drop With Growing Network Capacity
The Cardano network capacity has grown in 2024, meaning the blockchain can handle many users, as seen by increasing TPS. The other metric is the network capacity (red), which has been increasing steadily, reinforcing Cardano as a robust network. However, the actual network capacity used (green) has been dropping, which suggests reduced demand for the network and the underlying asset.
Cardano Price Forecasts Negative Sentiment
ADA price has been trending downwards since March 2024. From the chart below, the asset is firmly below the 21-day exponential moving average, reinforcing a bearish outlook.
While the crypto asset has experienced a good couple of weeks, there is a strong downward trend-line that acts as a strong resistance to the price. If the price of Cardano fails to break beyond it, the asset could drop 32% to $0.2. This also coincides with the profit target of the weekly chart’s multi-month double-top bearish reversal pattern.
On the flip side, if Cardano price breaks above the trendline, it would signal extreme market strength that could propel the asset price back to $0.50, where the next significant resistance exists. A break beyond that could catapult the price of ADA to $0.70.
Frequently Asked Questions (FAQs)
1. What is Total Value Locked (TVL) and why does its drop matter?
2. What are the key metrics to watch for Cardano’s price movement?
3. Are there any signs of potential recovery for Cardano?
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