3 Reasons Why Cardano Price Risks Dropping to $0.2

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As a seasoned researcher with years of experience in the volatile world of cryptocurrencies, I have seen my fair share of market fluctuations and project developments. The recent surge in Cardano’s price is indeed intriguing, but it doesn’t blind me to the potential risks that lie ahead.

Over the past fortnight, Cardano‘s price has made a remarkable climb from a low of $0.3 to $0.36. Last week’s candle exhibited a long lower wick, suggesting that bulls were controlling the market and intensified their buying spree into this current week. However, despite these gains, there is still a potential for Cardano’s price (ADA) to dip down to $0.2 according to broader technical analysis. Can the bulls prevent this impending decline?

Reasons Why Cardano Price Could Crash

The Cardano network has persistently strived to stay operational, but it’s been subjected to significant critique from the broader cryptocurrency community due to its perceived slow progress in making meaningful strides. Potential factors that might cause the ADA price to plummet to $0.2 could be:

  • 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

1. Surging TPS, Falling Usage

Exploring activity within the Cardano network suggests that while it’s capable of scaling and accommodating a large number of users, it could use assistance in attracting more users. Interestingly, as per Cexplorer, the transactions per second (TPS) on Cardano has been on an upward trend; however, the number of actual transactions seems to be decreasing, which appears contrary to expectations.

3 Reasons Why Cardano Price Risks Dropping to $0.2

The difference between these two measures indicates less activity on the Cardano network, potentially signaling a downturn in its price. Even though the network might be flawless, user engagement may be dwindling due to unfavorable cryptocurrency market conditions or outside factors.

When Transaction Per Second (TPS) is lower, it might appear as if a network has more transactions due to longer queues. But, as TPS rises, there’s typically less delay in processing transactions, offering a more accurate view of whether the network actually has active users.

2. Cardano TVL Is Steadily Dropping

Since the peak in March 2024, the Total Value Locked (TVL) of Cardano has gradually decreased, reflecting a period of mini-bull run. The surge in TVL during this time was anticipated given the possibility of new investors entering the market following the approval of the Bitcoin ETF. Nevertheless, during the subsequent market adjustment, Cardano failed to retain its user base.

3 Reasons Why Cardano Price Risks Dropping to $0.2

TVL dropped from $490 million in March to $181 million in August, suggesting investors have been slowly pulling funds from the Cardano ecosystem. 

3. Daily Active Users Drop With Growing Network Capacity

2024 saw an expansion in the capability of the Cardano network, allowing it to accommodate a greater number of users, evident through rising transactions per second (TPS). Another key indicator is the network’s capacity (represented by red), which has consistently risen, underscoring Cardano as a resilient network. Conversely, the utilized network capacity (green) has been decreasing, hinting at declining interest in the network and its underlying asset.

3 Reasons Why Cardano Price Risks Dropping to $0.2

Negative Onchain Metrics Signal Cardano Price Drop

The cost of ADA has been decreasing since March 2024. As we can see from the graph, the asset currently lies beneath its 21-day exponentially weighted moving average, which suggests a negative market trend.

Although the crypto asset has performed well over the past couple of weeks, a significant downward trend is evident, which serves as a powerful barrier for the price increase. If the price of Cardano cannot surpass this resistance level, it could potentially decrease by 32%, bringing its value down to $0.2. This decline also aligns with the profit target of the weekly chart’s multi-month double-top bearish reversal pattern.

3 Reasons Why Cardano Price Risks Dropping to $0.2

Conversely, should the price of Cardano surpass its current trendline, it would indicate a robust market momentum that might boost the asset’s price back towards $0.50, where a substantial resistance level lies. If it surpasses this level, it could drive the price of ADA up to $0.70.

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2024-09-13 09:57