Cardano Price Faces 22% Drop Risk as On-Chain Activity Declines

Highlights

Cardano price technical indicators suggest increasing sell pressure.
ADA was among the tokens recently classified by the SEC as non-security.
The on-chain volume of Cardano has been dwindling since March.

Cardano price continues to struggle in the volatile crypto market as heavy sell pressure weighs it down. On-chain metrics do not support a bullish outlook for the asset, further exacerbating the situation. Nevertheless, some good news just hit the market about ADA and some of its counterparts regarding regulatory clarity from the U.S. Securities and Exchanges Commission (SEC)—the Cardano (ADA) token is no longer considered a security.

Cardano Price Searches for Support

The price of ADA dropped 0.6% in the last 24 hours to trade at $0.399 during U.S. market hours on Wednesday. The ADA chart shows a gaping sell-off risk if market conditions don’t change soon.

ADA price appears to be trending downward due to a series of lower highs and lower lows, as well as the price trading below both the 50-day (green line) and 200-day (black line) exponential moving averages (EMA).

The primary support level for Cardano is around $0.30, as indicated by the lower boundary of the descending channel and historical price action. If bears prevail, Cardano price may drop 22% to find further support at the yearly low of $0.3165. Conversely, the immediate resistance level is near $0.42, aligned with the 50-day EMA. A stronger resistance exists at $0.50, where the 200-day EMA and previous highs converge.

The Relative Strength Index (RSI) is at 45.63, indicating a neutral stance but leaning towards the oversold territory. This suggests a potential for further downside before any reversal. Furthermore, the Chaikin Money Flow (CMF) at -0.07 indicates negative money flow and stronger selling pressure than buying pressure.

The ADA daily trading volume significantly decreased, suggesting a reduced buying interest at the current levels. This typically precedes a continuation of the bearish current trend.

ADA’s On-chain Metrics Support Bearish Trend

According to Santiment data, Cardano’s on-chain volume has been dwindling since March and hit its lowest in July. On-chain volume indicates increased network usage and can be used to speculate on the price of the underlying asset. The decline in Cardano’s on-chain volume is bearish as it coincides with a drop in ADA price over the 5-month period. Over the last 24 hours, Cardano’s on-chain volume was a little over $1.5 billion, comparatively lower than March’s $11.5 billion.

According to data from Coinalyze, Cardano price open interest slightly increased by 1.81% in the last 24 hours, suggesting little capital inflow into ADA. Additionally, the daily funding rate increased from 0.006 to 0.0132 in the last 24 hours. Nevertheless, the funding rate is predicted to drop to 0.0106 tomorrow.

Despite the unpleasant network activity, ADA was among the tokens recently classified by the SEC as security. However, the regulatory agency has retracted its decision, changing its stance on the crypto asset in its case against Binance. Could this be setting up the crypto space for more ETF approvals?

Frequently Asked Questions (FAQs)

1. How has Cardano's on-chain activity changed recently?

Cardano's on-chain volume has significantly declined, hitting its lowest since March. In the last 24 hours, the on-chain volume was approximately $1.5 billion, compared to $11.5 billion in March.

2. Why is Cardano facing a potential 22% drop?

Cardano is facing a potential 22% drop due to increased sell pressure, declining on-chain activity, and bearish technical indicators, including lower highs, lower lows, and trading below the 50-day and 200-day EMAs.

3. What recent news affected Cardano's status as a security?

The U.S. Securities and Exchange Commission (SEC) recently clarified that Cardano (ADA) is not considered a security, reversing its previous stance.

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Evans Karanja

Evans Karanja is a crypto analyst and journalist with a deep focus on blockchain technology, cryptocurrency, and the video gaming industry. His extensive experience includes collaborating with various startups to deliver insightful and high-quality analyses that resonate with their target audiences. As an avid crypto trader and investor, Evans is passionate about the transformative potential of blockchain across diverse sectors. Outside of his professional pursuits, he enjoys playing video games and exploring scenic waterfalls.

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