Preface

This article will focus on analyzing the current trends and changes in the market of Cardano blockchain’s token ADA. Because ADA has experienced several large fluctuations since 2018, especially after reaching a high on 2021/09/02 ($3.10), the price fell back to $0.22 (2023/06/10). To better understand these changes, we will focus on the relationship between on-chain data, changes in currency holders, and prices.

Therefore, this article will use the In/Out of the Money on-chain data to analyze how the profits and losses of different investors in the market, holding quantity, circulation, etc. will affect the market trend. The long-term performance and potential impact of ADA in the market will also be discussed based on Cardano’s original technology, development, macroeconomic situation, etc.

Background Analysis

What is Cardano or ADA?

• Cardano is an open source and decentralized blockchain platform.

• It is mainly used to run smart contracts and decentralized applications.

• The design concept of the blockchain platform is built to ensure the security, energy saving, efficiency and scalability of the platform.​

• The consensus mechanism used is Proof of Stake (PoS)

As a token of Cardano, ADA is used for:

• Pay transaction fees

• Participate in governance (ADA holders can participate in voting on the future development of the platform)

• Serve as collateral for borrowing and participate in liquidity mining (earn interest and rewards)

• NFT Marketplace (buy, trade and issue NFTs)

Founder

The founder of Cardano is Charles Hoskinson, who is also one of the co-founders of what we know as Ethereum and the CEO of IOHK (the developer of Cardano).

• Technology entrepreneur and mathematician from Colorado, USA

• Founding Chairman of the Bitcoin Foundation Education Committee

ADA on-chain indicators and interpretation

The picture above shows ADA’s In/Out of the Money Around Price (price distribution of profit status)

In/Out of the Money Around Price (price distribution of profit status): Calculate the average purchase price of addresses holding tokens, and then compare it with the current price.

In or In The Money (green): The current price is higher than the average buying price of the address holding the token, indicating a profit status.

At or At The Money (grey): The current price is close to the average buying price of the addresses holding the token, which is a flat state.

Out or Out The Money (red): The current price is lower than the average buying price of the address holding the token, indicating a loss state.

Paragraph conclusion (1)

Shows whether different addresses holding tokens are profitable or losing money at the current price. (Only show the profit and loss within 15% of the current price fluctuation)

The larger green or red circles shown in the above figure represent more addresses making profits or losses. Of course, the smaller the green or red circle, the less the address is profitable or losing.

The picture above shows ADA’s In/Out of the Money Around Price (price distribution of profit status) in a chart.

Red box: Mark the Out or Out The Money price range through the number of addresses and proportion of losses.

(larger red circle)

Blue line : current price

Green box: Mark the In or In The Money price range through the number of addresses and proportion of losses

(larger green circle)

Through the In/Out of the Money Around Price indicator, we can indirectly infer short-term support and resistance, because In or In The Money shows that these addresses are already profitable at the current price. Therefore, it can be concluded that these addresses may continue to hold or increase positions during the profit-making process, thereby forming support from the price and driving the price (purchasing power)

Out or Out The Money shows that these addresses are already losing money at the current price. Therefore, if the price rises back to the red box, these addresses may choose to sell (selling pressure) in order to reduce losses.

In addition, there may also be other factors that cause the price to fall.

• Addresses that are in profit are sold to lock in profits.

• Stop loss for losing addresses

The picture above shows ADA’s Historical In/Out of the Money Around Price (price distribution of historical profit status)

Historical In/Out of the Money Around Price (price distribution of historical profit status): Whether the address holding the token in the past time and the current price has made a profit or a loss

In or In The Money (green): The current price is higher than the average buying price of the address holding the token, indicating a profit status. So when green expands, it means that most of the people or addresses in the market are making profits.

At or At The Money (grey): The current price is close to the average buying price of the addresses holding the token, which is a flat state.

Out or Out The Money (red): The current price is lower than the average buying price of the address holding the token, indicating a loss state. So when the red is bigger, it means that most people or addresses in the market are losing money.

Paragraph conclusion (2)

Shows how many people or addresses in the market made profits and losses under different price changes. (When prices rise, more people make profits. When prices fall, more people lose money.)

The picture above shows the simplified Historical In of the Money Around Price (historical profitability price comparison) of ADA.

By simplifying this indicator, we can get the following market information from ADA: Profit status (green): When the green color expands or the percentage of profitable addresses is greater than the loss, the price will fall.

This concept is similar to the reason for the Rule of 82 in market behavior, which is the phenomenon of emotional reversal in the market. Only a small part of the market can obtain most of the benefits. (Red box) So when most addresses are in profit (greater than 50%), the market tends to trend downward. (inside orange frame)

This is no exception during an upward price trend or a bull market. Most of the addresses have seen prices fall back when they are making profits. The most obvious thing is that the part circled in red is when nearly 100% of the addresses are in profit, when the market reaches a high point. The price then reversed and started to fall.

Paragraph conclusion (3)

When most addresses are in profit, it triggers overheating in the market (everyone is making money), so most people choose to sell (lock in profits), which leads to the emergence of selling pressure and triggers a decline.

The picture above shows the simplified Historical Out of the Money Around Price (historical loss state price comparison) of ADA.

By simplifying this indicator, we can get the following market information from ADA: Loss status (red): When the red color expands or the percentage of loss addresses is greater than the profit address, the price tends to rise.

(blue box) This also means that the more addresses lose money (80%), the price bottoms out. It can also be understood that when the market is overly pessimistic, prices rise. To put it simply, when more addresses lose money, they may not want to sell (after all, they all lose money). Subsequently, a critical point emerged as new funds flowed into the market. (Buy low price)

Changes in ADA currency holding structure

The picture above shows ADA’s Historical Concentration (historical currency holding distribution)

ADA's Historical Concentration (historical currency holding distribution): The distribution of ADA's liquid supply among 3 different groups, namely the number of Link tokens held and the % of the circulating supply. These 3 different groups for:

Whales (green area): Addresses holding more than 1% of the token’s liquid supply

Investors (blue area): addresses holding 0.1% to 1% of the token’s liquid supply

Retail Retail Investors (orange area): Addresses holding less than 0.1% of the token’s liquid supply

The picture above shows the simplified Historical Concentration of ADA (historical currency holding distribution)

Gray straight line: There are large fluctuations in the % of ADA supply held by 3 different groups: Whales, Investors and Retail

When Whales (green), Investors (blue) and Retail investors (orange area) have large fluctuations in the % of ADA supply held by them, their holdings also have significant upward or downward changes. . One of the reasons that causes prices to rise and fall. The following will explore what price behavior will occur when large fluctuations occur:

The picture above shows the time point when there were large fluctuations in the % of the ADA supply held by three different groups on 2018/02/06

After a large fluctuation occurred on 2018/02/06, the price dropped by 67.92%. Over the 30-day period, the share of ADA held by whales and investors increased, while that of retail investors fell. Possibly due to selling by retail investors, the reduction in ADA holdings caused the price to fall. Whales and investors then added their support.

The picture above shows the time point when % of the ADA supply held by three different groups fluctuated greatly on 2019/10/30.

After a large fluctuation occurred on 2019/10/30, the price fell by 33.28%. Over the 30-day period, the percentage of ADA held by whales increased, while the percentage held by investors and retail investors fell. The price fell as investors and retail investors reduced their holdings of ADA, but whales increased their holdings by 23.57%.

The picture above shows the time points where there were large fluctuations in the % of the ADA supply held by three different groups on 2020/08/08 and 2020/11/06

After a large fluctuation occurred on 2020/08/08, causing the price to drop by 49.22%. Over the 30-day period, the percentage of ADA held by whales fell while the percentage held by investors and retail investors increased.

Investors and retail investors have massively added to their holdings of ADA amid the price increase. The whales began to make profits from the first two increases in holdings, so they reduced their holdings as the price rose. One of the reasons for the price drop.

Then there was a big swing on 2020/11/06, which caused the price to increase by 341.10%. Over the 30-day period, the percentage of ADA held by whales fell while the percentage held by investors and retail investors increased.

The proportion of whale holdings also fell from 6% of the circulating supply to 1%. Because the first reduction was achieved in the previous two increases, and the reduction was repeated this time (the second time).

The picture above shows 2023/10/24, 2023/10/27 and 2023/11/04. There are large fluctuations in the % of the ADA supply held by three different groups.

Larger fluctuations occurred on 2023/10/24, 2023/10/27 and 2023/11/04, resulting in a price increase of 149.08%. Over the 30-day period, the percentage of ADA held by whales and retail investors fell while the percentage held by investors increased.

Previously, chip exchange behavior before fluctuations could be found through the simplified Historical Concentration chart of ADA. The holdings of whales are slowly increasing while investors and retail investors are decreasing. It also leads to situations where prices rise, with whales buying low and selling high while investors are still buying high.

The picture above shows the time point when % of the ADA supply held by three different groups fluctuated greatly on 2024/04/12

This follows a larger move on 2024/04/12, which resulted in a price drop of -46.72%. Over the 30-day period, the proportion of ADA held by whales and retail investors increased while the proportion of investor holdings fell. It can be judged that this decline is the selling behavior of investors. Because both whales and retail investors increase their holdings when prices fall.

paragraph summary

• Whales (green): The increase and decrease of whale holdings requires a long period of accumulation to have obvious market impact and price reaction (the amount of funds is large and cannot be bought or sold at once).

• Investors (blue) and Retail investors (orange): The increase or decrease in holdings of investors and retail investors has a faster impact on the short-term market (less funds, more flexibility)

Full text summary

This article mainly analyzes the historical and recent market trends and changes of Cardano's token ADA. By using the In/Out of the Money indicator to observe the profit and loss status of currency holders, we can determine whether the market is selling when most people are in profit. Pressure causes prices to fall, and when most people lose money, the market has a chance to rebound. In addition, you can judge whether the market is overheated or pessimistic through the relationship between profits and losses.

The changes in positions among whales, investors and retail investors are also a judgment point. When the position ratio changes, the price will also fluctuate accordingly. Prices fall when whales increase their holdings, but generally rise when investors and retail investors increase their holdings. Through the data of these on-chain indicators and the currency holding status of large investors, it is easier to judge the market trend and when to buy and sell, and achieve better strategies.

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