The first layer token Cardano (ADA) has been consolidating within a price range since the beginning of December. However, its price has been on a downward trend over the past week, decreasing by 17% in the last seven days.
This decline is caused by multiple factors, including selling by large holders and profit-taking by many holders. This poses a risk for altcoins to maintain price levels below $1 in the short term, and this article will explain the reasons in detail.
Surge in Cardano profit-taking activity
The decline in net flow of large Cardano holders (an indicator used to track the buying and selling activity of large investors or whales) confirms that this group of holders has reduced their accumulation of ADA. Data from IntoTheBlock shows that the net flow of ADA large holders has plummeted by 139% in the past seven days.
Large holders refer to whale addresses that hold more than 0.1% of the circulating supply of a certain asset. When their net flow decreases, it indicates that whales are selling their held assets. This is a bearish signal, suggesting that these large investors may have lost confidence in the future price of the asset.
The recent profit-taking phenomenon in the ADA market is not limited to large investors. This trend has spread to most token holders, reflecting a general loss of confidence in the future price potential of the asset.
Supporting this view is the declining trend of the market value to realized value (MVRV) ratio for altcoins. Data from Santiment shows that the MVRV ratio peaked at 113% on December 2 and then began to decline. As of the latest update, the ratio is at 72.35%.
This indicator tracks whether the asset is overvalued or undervalued relative to its holders' average cost basis. When it declines, it indicates that the gap between the asset's market value and its actual value is narrowing.
In the case of ADA, despite the MVRV remaining positive, its decline indicates that holders are taking profits, thereby reducing the extent of unrealized gains. This suggests that bullish sentiment is weakening and market selling pressure is increasing.
ADA Price Prediction: Could fall to $0.77
From a technical perspective, the daily chart shows that ADA's next major support level is at $0.90. As of the time of writing, it is trading at $1.01, but an increase in profit-taking activity will lead to a test of this support level. If it fails to hold, the token's price will plummet to $0.77.
On the other hand, if buying activity revives, the price of ADA may rebound to $1.06 and climb to a two-year high of $1.32.
