As a seasoned crypto investor with years of rollercoaster rides under my belt, I can’t help but feel a mix of anticipation and apprehension as I observe the current state of the market. The PlusToken’s $1.3 billion ETH sell-off could potentially have significant repercussions for Cardano (ADA), one of the Ethereum-killers, given its high correlation with Ether.
The price movement of Cardano is significant as it hovers in a critical area while the broader crypto market faces challenges trying to rise amidst Bitcoin‘s selling pressure. On the other hand, Ethereum (ETH) coins seized in the PlusToken scam have been moved to centralized exchanges and could potentially be sold off. Given that Cardano is often referred to as one of Ethereum’s main competitors, the question arises: Can Cardano withstand a $1.3 billion worth of sell-offs?
Why PlusToken’s $1.3B ETH Matters For Cardano Price?
Starting from early August, for the first time since 2021, activity was observed on the blockchain regarding the leftover ETH linked to the PlusToken scam. Over the past day, approximately 7,000 ETH out of the total 542,000 ETH (valued at around $1.3 billion) have been transferred to exchanges, which suggests a potential plan to sell off the remaining tokens.
By the time of its closure, the PlusToken scheme had amassed 830,000 ETH ($1.984 billion). The Ether remained largely untouched until the summer of 2021, when just under a third of the 830,000 ETH was sent to a relatively unknown exchange called Bidesk and presumed sold.
Over the past day, a total of 15,700 Ether was transferred from previously identified wallets. Approximately 7,000 ETH were sent to Binance, Bitget, and OKX trading platforms. It’s reasonable to expect that more exchange deposit addresses associated with these platforms will become active in the future.
The possible auctioning off of PlusToken’s frozen assets might have a substantial influence on other cryptocurrency values. Given that Ethereum serves as the foundation for numerous decentralized finance (DeFi) systems and decentralized applications (dApps), a decrease in Ethereum value could impact the functionality and security of these platforms, potentially altering the worth of tokens linked to them.
Multiple altcoins tend to mirror Ethereum’s price movements closely due to their strong association with it. For instance, the Crypto Correlation Tool indicates that Cardano (ADA) has one of the highest correlations with Ethereum over a 90-day span, only surpassed by Polkadot (DOT).
The Pearson correlation coefficient quantifies the association between two cryptocurrencies’ daily return rates. When the value is close to 1, it suggests that if one asset increases, the other is likely to increase as well; a value near -1 indicates they tend to move in opposite directions. In this case, with a correlation coefficient of 0.8, we can say that ADA‘s price is substantially influenced by Ethereum’s volatility.
ADA price is down 1.9% in the last 24 hours and is trading at $0.3395.
How Low Could Cardano Go If ETH Price Hits $1950?
If China decides to sell Ethereum in large quantities, it could significantly lower the price of Ethereum. Back when the Ethereum Foundation sold $30 million worth of ETH, the price dropped by approximately 4.8% on that day. Therefore, if an equivalent amount of $1.3 billion were to be sold, we might expect a drop of around 16.8%, which would take Ether to a new low for the year of roughly $1,953.
If Ethereum decreases by 16.8%, we can expect a corresponding drop of approximately 30.24% in ADA, which would place it near the $0.23 mark, given their correlation coefficient of 0.8.
Even if China doesn’t offload its Ethereum holdings, it could still signal market resilience, causing the Cardano (ADA) price to recover from its current level and move towards the upper trend line approximately at $0.45. This represents a potential 23.56% rise in value.
The calculations here are overly simplified and do not account for other factors that influence the market, such as investor sentiment. Overall, the Cardano price lies at a critical point between a potential 23% profit and 30% losses. What China does next could determine the fate of the ADA price.
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2024-10-10 12:14