Cardano (ADA) has recently seen a decline in its trading price, and there are several factors that contribute to this trend. First, from a technical perspective, ADA’s correction is part of a larger corrective cycle that began in mid-December when ADA reached a high of $0.68. Traders began booking profits as ADA’s relative strength index (RSI) on daily charts became overbought, surpassing the 70 mark. An RSI reading above 70 indicates that the asset is becoming overvalued and may experience a reversal or corrective pullback.
ADA’s correction is confirmed by its downward movement within a descending parallel channel. The RSI is currently positioned at 40, indicating that bears are in control of the market.
Additionally, data from TokenTerminal shows that ADA’s price drop coincides with a decrease in trading volume and the number of core developers. The number of unique GitHub users making multiple commits to the blockchain’s public GitHub repository on a daily basis dropped from a three-month high of 164 developers on December 10, 2023, to 123 on January 18, representing a 25% decline. Transaction volume also decreased by 87% during this period. CoinMarketCap data reveals that ADA’s daily trading volume dropped from approximately $1.165 billion on December 10, 2023, to $381 million on January 18. These declines in trading volume and core developers suggest that these metrics have influenced ADA’s short-term price trends.
Furthermore, ADA’s price decline can be attributed to the broader correction in the crypto market. This correction began after the approval of spot ETFs and ADA has followed the same pattern. Factors such as the reducing Crypto Fear and Greed index and selling driven by spot Bitcoin ETFs may have contributed to traders’ decision to sell their ADA holdings. Bitcoin, in particular, has experienced significant selling pressure, with its price dropping to $40,000 on January 12. This sell-off has been linked to large outflows from the Grayscale Bitcoin Trust (GBTC), as investors opt for Bitcoin ETFs with lower fees. The decline in Bitcoin’s price has led to a drop in the entire crypto market, with major altcoins like ADA following suit.
The Crypto Fear and Greed index, which measures market sentiment, has also shifted from the “greed” zone to “neutral” on January 19. This decline in bullish market sentiment may have contributed to the overall correction in the market.
It is important to note that this article does not provide investment advice or recommendations. Investors should conduct their own research and exercise caution when making investment decisions.