The price of Cardano (ADA) has fallen by about 18% over the past seven days, in line with the broader market sentiment after a period of consistent growth. However, in addition to the price, activity on the Cardano network is also under considerable pressure.
The overall decline surrounding the project has raised concerns about the altcoin's short-term performance. According to on-chain analysis, those concerns may be well-founded.
Cardano Hits Major Hurdle
On December 8, the price of Cardano climbed to a yearly high of $1.22. But the digital currency has since fallen to $0.88 due to significant selling. While ADA holders may be hoping for a short-term recovery, the In/Out of Money Around Price (IOMAP) suggests it may not be easy.
IOMAP is an indicator that identifies on-chain support and resistance. To do this, it looks at addresses that are currently in unrealized profit versus addresses that are in loss. Typically, the higher the volume at a price, the stronger the support or resistance.
According to IntoTheBlock, the main resistance level for ADA is around $0.92. At this area, 58,470 Cardano addresses have accumulated 951.02 million tokens, higher than the number of tokens in the money that fluctuates between $0.74 and $0.88.
Cardano In/Out of Money Around Price. Nguồn: IntoTheBlock
If buying pressure continues to weaken, ADA price may struggle to break above current levels. Instead, the token may experience a prolonged correction.
Data from Santiment supports this view, indicating a significant drop in Cardano network activity. On December 16, the number of 24-hour active addresses exceeded 51K, but at the time of writing, this number has dropped to 32,700.
An active address is defined as a wallet that participated in a successful transaction — either as a sender or receiver — during a given time period. This metric is a strong indicator of daily user activity on the blockchain.
Cardano Active Addresses. Nguồn: Santiment
An increase in active addresses indicates increased user engagement, which is generally positive for price action. Therefore, the ongoing decline in this metric suggests bearish sentiment around ADA.
ADA Price Forecast: Prolonged Correction Inevitable
From a technical perspective, the Exponential Moving Average (EMA) suggests that Cardano's price could continue to decline. The EMA is an indicator that measures the trend surrounding a Cryptocurrency.
On the daily chart, the price of ADA has dropped below the 20 EMA (blue). The drop below the EMA signals a bearish outlook. Additionally, the value of the token is near the same position as the 50 EMA (yellow).
This position shows that Cardano is close to losing support at $0.88. If this continues, the price of ADA could drop to $0.77. In an extremely bearish scenario, the value of the altcoin could drop to $0.55.
Cardano Daily Analysis. Source: TradingView
However, if Cardano network activity increases, this trend could change. In that case, the value of the Cryptocurrency could jump to $1.33.