- Cardano’s price faces potential risks of dropping to $0.2 due to declining transaction counts despite rising TPS, a significant decrease in total value locked, and a drop in daily active users.
- These factors, combined with bearish technical indicators, suggest that ADA might struggle to maintain its current levels.
As Cardano (ADA) grapples with its position in the volatile cryptocurrency market, several indicators suggest that the price could face significant challenges. Despite recent gains, the potential for a drop to $0.2 looms large. Here’s a closer look at the factors that might drive ADA to this critical support level.
Surging TPS Amid Falling Usage
Cardano’s network activity presents a perplexing situation: while transactions per second (TPS) have increased, the overall transaction count has been declining. This counterintuitive trend, revealed by Cexplorer, suggests that although the network can handle more transactions, actual user engagement is waning.
The increase in TPS without a corresponding rise in transactions indicates reduced network activity, which is bearish for ADA’s price. If users are less active despite higher network capacity, it could signal broader market disinterest or external factors dissuading participation.
Declining Total Value Locked (TVL)
The total value locked (TVL) in Cardano’s ecosystem has witnessed a significant decline since its peak in March 2024. At that time, the TVL soared to $490 million, partly driven by excitement around new developments and the Bitcoin ETF approval. However, this enthusiasm has not been sustained.
By August 2024, TVL had plummeted to $181 million, reflecting a withdrawal of funds from Cardano. This drop suggests that investors are losing confidence or shifting their assets elsewhere, which could further depress ADA’s price.
Drop in Daily Active Users
Cardano’s network capacity has expanded throughout 2024, indicating that the blockchain is capable of handling increased demand. However, this growth in capacity has not been matched by an increase in daily active users.
The disparity between network capacity and actual usage (with capacity growing while usage declines) highlights a lack of demand. If fewer users are actively engaging with the network, it could be a sign of reduced interest in ADA, contributing to a potential price drop.
Bearish Technical Outlook
From a technical perspective, ADA’s price has been trending downwards since March 2024. It currently sits below the 21-day exponential moving average, reinforcing a bearish outlook. Despite recent short-term gains, ADA faces a strong downward trend-line that acts as a significant resistance point.
If ADA fails to breach this trend-line, it could drop 32% to $0.2, aligning with the profit target of a bearish reversal pattern observed on the weekly chart. Conversely, breaking above this resistance could signal strength, potentially pushing ADA back to $0.50 or even higher.
As Cardano navigates these challenges, its ability to reverse the current trends and maintain investor confidence will be crucial in determining whether the price will indeed tumble to $0.2 or rise to new heights.
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