Three causes Cardano value might drop to $ 0.50 within the coming days – FXStreet
- Cardano price has been on a parabolic expansion since the end of December 2020 with no sensible corrections.
- The number of subsea investors who bought ADA at a local top has increased.
- Retail owners are increasing as whales dump their stocks.
The Cardano Prize was a top performer leading the bull run. The IOHK developers have released several major upgrades to the blockchain, which has dramatically improved its usefulness.
What’s interesting, however, is that ADA hasn’t seen a healthy retreat compared to its massive and explosive on-ramp. Hence, investors should be wary of this coin, especially if the significant support gives way.
Cardano price fights for progress
The Cardano price saw a huge surge from $ 0.10 in late 2020 to more than $ 2 in 2021. Looking back, ADA received some of the most critical upgrades to its blockchain during that time, such as the Mary Hard Fork, Goguen upgrades, etc. played a role in its exponential growth.
ADA price hit an all-time high of $ 2.51 on May 16 and has been on a downward trend ever since. So far, the so-called “Ethereum killer” has fallen by around 41% and is showing signs that it could decline.
The reason for the bearish sentiment surrounding the Cardano price lies in two reasons, the cryptocurrency market structure and the weak recovery from recent crashes and ADA’s on-chain metrics.
Bitcoin price is observing a potential head and shoulders pattern that could spiral the entire market. Given ADA’s strong correlation with BTC, Cardano price is likely to follow if the overall market takes a nosedive.
In addition, the Cardano price appears to be correcting itself after failing to move higher. With ADA trading above two stable support levels at $ 1.40 and $ 0.981, the prospects of a downturn multiply. Hence, the $ 0.981 smash will open the floodgates and trigger a 46% downturn to $ 0.525 or a 57% correction to $ 0.414.
The range between $ 0.525 and $ 0.414 went unmet as the ADA rose from $ 0.345 to $ 0.663 in the first week of February. Hence, market makers are likely to bring Cardano price to these levels.
From its current position of $ 1.53 to $ 0.414, the Cardano price could more than triple if this decline manifests itself.
ADA / USD 1 week chart
The first red flag to support the bearish thesis discussed above is based on IntoTheBlock’s Global In / Out of the Money (GIOM) model. This metric shows that the majority of owners who bought ADA were close to the all-time high.
According to GIOMA, around 465,000 addresses previously bought 7.7 billion tokens at an average price of 1.68 US dollars. These investors are “out of the money” and may be tempted to sell if ADA continues down, adding selling pressure on the current bearish outlook.
The three immediate support clusters hold only 7.35 billion ADA, relatively fewer tokens than the underwater investors at $ 1.68. This contrast suggests that the potential downturn will be brutal.
ADA GIOM diagram
Addresses that comprise less than 0.1% of Cardano’s circulating supply are defined as retail. These investors own 27.03 billion tokens, or 76.28%. In contrast, whales that own more than 1% of the supply make up about 1.44%, or 511 million ADA.
Retail investors are not known for their patience and tend to sell in a panic in times of upheaval. Therefore, if there is a potential sell-off, these owners could increase the pressure to sell.
ADA concentration diagram
Another sign of the dire nature of the ADA payout is the sharp decline in the number of owners or investors who have held ADA for more than a year. The addresses of these market participants have dropped from 213,000 in June 2020 to 170,000 today.
This 20% drop in price suggests that long-term owners have no confidence in the future development of ADA price.
ADA ownership by time hold chart
Hence, investors need to keep a close eye on the support levels at $ 1.40 and $ 0.981. A breakdown of these barriers could trigger a massive sell-off.
Fundamentals and optics for ADA are improving exponentially
While the technical and on-chain perspectives are overly pessimistic, the fundamental outlook is warm and promising. During the course of 2021, the Cardano blockchain received important upgrades that changed it for the better and enhanced its usefulness.
Some of these updates include Shelley, a milestone implemented in July 2020 that was recently upgraded in 2021, moving block production from federated to fully decentralized.
Similarly, the Mary hard fork added multi-asset functionality that allows users to develop assets natively on the ADA blockchain and open the floodgates for DeFi.
In addition, the Goguen era, which has yet to gain momentum, will equip the Cardano blockchain with smart contract capabilities.
Another critical development is the IOHK team’s partnership with the Ethiopian government to build a blockchain-based student-teacher solution called Atla PRISM. The cooperation with Tanzania’s World Mobile Group is providing a tailwind to democratize access to digital, financial and social services in Africa while using the capabilities of the ADA blockchain.
To sum up, Cardano’s fundamental performance seeks to offset the declining outlook that awaits ADA price. With the crypto market looking weak and ready to collapse, the bullish scenario seems less favorable.