As a seasoned crypto investor with scars from the 2017 bull run and the subsequent bear market, I’ve learned to never take market indicators at face value. The recent surge in Cardano’s NVT ratio has me feeling a bit uneasy, reminiscent of the times when Bitcoin’s market cap was larger than the GDP of many countries.
Currently, the digital currency known as Cardano, which ranks as the 11th largest in terms of market value, is at a crucial turning point. The price of its native token ADA seems poised for a possible surge. Nevertheless, data from the blockchain suggests a more intricate scenario.
Based on information from IntoTheBlock, the Network Value to Transactions (NVT) ratio for Cardano has climbed to its peak since June. This suggests a substantial drop in on-chain activity compared to the increase in its price development.
The NVT ratio of Cardano has reached its peak since June, signifying a reduction in on-chain transactions compared to price increase. This traditional warning sign of overvaluation is significant considering ADA’s recent poor performance, potentially indicating more drops to come. Historically, such high NVT ratios have been followed by decreases in the asset’s value.
— IntoTheBlock (@intotheblock) October 29, 2024
The NVT ratio is a key indicator that compares a cryptocurrency’s market capitalization to its transaction volume. A rising NVT ratio shows that price increases may not be accompanied by an increase in on-chain activity, perhaps indicating overvaluation.
As a crypto investor, I find myself observing a significant sign of potential overvaluation for Cardano (ADA), given its recent underperformance. Over the past month, ADA has taken a dive of approximately 11.4%, which is concerning to me as an investor.
Historically, high Non-Value Transactions (NVT) ratios have frequently been followed by price declines, indicating that if there isn’t a rise in on-chain activity, the price of Cardano may find it hard to sustain its current momentum.
Based on their analysis, it appears that there could still be a possibility for ADA’s price to decrease further, as indicated by low on-chain activity, which suggests that the recent price rise might have been largely fueled by speculation rather than organic market activity.
Cardano eyes potential breakout
After touching a low of $0.31 on October 25th, Cardano (ADA) has started to increase. This upward trend has persisted for the past three days, and if it continues today, ADA could end up having four consecutive days of growth.
Today, the price of ADA has reached an intraday high of $0.351, approaching the daily Simple Moving Average (SMA) 50 at $0.355. If this level is broken, the price could potentially aim for the daily SMA 200 at $0.397. Since March 2024, Cardano’s price has been largely influenced by its daily moving averages of 50 and 200.
Therefore, if ADA consistently rises above its daily moving averages, it could leave its current price range and indicate a resurgence in the bull market. Under such circumstances, ADA may attempt to reach new peak prices beyond $0.76 for the year.
Anticipation runs high for Cardano blockchain’s two-phase Chang Hard Fork, an important update aimed at improving network capabilities and decentralized management. This overhaul could potentially increase on-chain transactions within Cardano and possibly spark a surge in the ADA token’s market price.
It’s unclear whether the signals from the NVT will hold up or not, and it’s also uncertain which direction the price of ADA might move in the future.
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2024-10-29 18:45