Cardano Price Drops 4.7% Despite Low Inflation Rate and Network Upgrades

Cardano price began consolidating on Saturday after signs of market weakness flashed on the Bitcoin chart. The asset broke down from a bearish setup, showing signs of dropping further. Meanwhile, the Chang upgrade is looming even closer as 79% of nodes have migrated to v9.1.0. Cardano inflation boasts a tiny 2.5% per annum, lording over other chains. However, can these developments save ADA from the incoming drop?

Will Cardano Price Respond to Low Inflation Rate?

The Cardano network demonstrates stability compared to other chains such as Solana (SOL), Avalanche (AVAX), Cosmos (ATOM), and Polkadot (DOT). According to ADA Whale, Cardano’s inflation rate is currently 2.5% per annum, which is lower than the other chains mentioned. This low inflation rate indicates steady and stable network growth. 

Cardano had an inflation of 2.5% over the last 1y. For comparison, Sol: 14%. Avax: 15%. Cosmos: 13%. Dot: 10%

Cardano has achieved stable, significant levels of adoption with low inflation

These are what we call the fundamentals. And it explains why Cardano will remain up there

— ADA whale (@cardano_whale) August 8, 2024

Additionally, on August 9th, Cardano implemented the Hydra upgrade to enhance the network’s scaling capabilities. Combined with the upcoming Chang hard fork, these improvements may enable ADA to surpass the $1 price level finally.

Cardano Price Analysis: Can Bulls Overcome Bearish Sentiment?

The ADA price is bearish in the short term. It has recently broken down from a rising wedge pattern, which is typically a bearish reversal signal. This breakdown suggests further potential downside.

The price action also trending below both the 50-day ($0.3457) and the 200-day ($0.3788) exponential moving averages (EMAs), reinforcing the bearish trend. Cardano price sports support and resistance levels at the following areas:

• Resistance 1: The 50 EMA at $0.3457.
• Resistance 2: The 200 EMA at $ 0.3788.
• Support: Around $0.28.

The Relative Strength Index (RSI) is at 40.42, close to the oversold territory. This indicates that while the bearish momentum is strong, the asset could be nearing an area where buyers may step in.

The Chaikin Money Flow (CMF) shows the buy or sell pressure on an asset at -0.14. This indicates that more capital is flowing out of ADA than into it, which aligns with the current bearish sentiment.

If the price of ADA breaks below the $0.28 support level, the short-term drop may become a fully-fledged continuation of the bearish trend. Cardano will seek further support lower around $0.24

On-Chain Metrics Support Short-Term Drop

Cardano’s open interest across exchanges dropped 2.99% over the last 24 hours. The ADA aggregated cumulative volume delta, per Coinalyze, is negative at 97.5M. This indicates that ADA Longs are closing, and Shorts may open shortly after. It is a signal Cardano price may continue dropping.

Additionally, Messari Research analytics reveal that the transaction count on Cardano reached a one-year low on August 11, indicating reduced network activity. This decline in transaction volume suggests a drop in investor confidence, which is likely reflected in the price of Cardano.

Nevertheless, ADA price may still yet turn bullish, as data from CoinGecko shows Cardano volume increased by 47% over the last 24 hours while its price dropped 4.7% to trade around $0.336. This volume-price divergence is a positive signal that may result in a bullish breakout when the asset completes the pullback.