Cardano’s recent decline in trading can be attributed to several factors. Firstly, from a technical perspective, ADA has been experiencing a corrective cycle since mid-December, following its peak at $0.68. This correction was triggered by the asset’s relative strength index (RSI) on daily charts becoming overbought, surpassing the 70 mark. An RSI reading above 70 indicates that the asset is overvalued and may undergo a reversal or corrective pullback.
Furthermore, ADA’s correction is confirmed by its movement within a descending parallel channel, with the RSI currently positioned at 40, indicating that bears have control over the market.
In addition, the decline in ADA’s price since mid-December coincides with a decrease in both trading volume and the number of core developers. Data from TokenTerminal shows that the number of unique GitHub users making multiple commits to the blockchain’s public GitHub repository on a daily basis dropped from 164 developers on Dec. 10, 2023, to 123 on Jan. 18, representing a 25% decline. Transaction volume also decreased by 87% during the same period, from approximately $2.34 billion to $304 million. CoinMarketCap data reveals a similar trend, with ADA’s daily trading volume falling from approximately $1.165 billion on Dec. 10, 2023, to $381 million on Jan. 18. These declines in trading volume and core developers likely played a role in ADA’s 27% price drop during this time period.
The broader crypto market’s correction, triggered by the approval of spot ETFs, has also impacted ADA’s price. Bitcoin, in particular, has experienced significant selling pressure, with its price dropping to $40,000 on Jan. 12. This can be attributed to large outflows from the Grayscale Bitcoin Trust (GBTC), as investors opt for Bitcoin ETFs with lower fees. As Bitcoin’s price dropped, the entire crypto market followed suit, with altcoins like ADA experiencing a decline as well. The Crypto Fear and Greed index also shifted from the “greed” zone to “neutral” on Jan. 19, reflecting declining bullish market sentiment.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and exercise caution when making investment decisions.