Cardano’s daily transaction volume has been declining since March, despite its relatively low Network Value-to-Transaction ratio. Vini Barbosa, a crypto analyst, shared insights on X about Cardano’s recent activity and its implications for the ADA token’s valuation.
This development comes amid broader market shifts in the crypto sector which has seen assets like Bitcoin slip and XRP surge.
Cardano’s Transaction Volume Downtrend
Barbosa highlighted a drop in Cardano’s transaction volume. “Since March, Cardano’s daily transaction volume has made lower highs, consolidating a downtrend,” he noted.
According to Barbosa, data from Santiment reveals that Cardano processed $1.53 billion in transactions over the past 24 hours.
$ADA: Cardano's Transaction Volume (USD) is on a downtrend.Since March, Cardano’s daily transaction volume has made lower highs, consolidating a downtrend. Data from @santimentfeed shows $1.53 billion transacted on Cardano in the last 24 hours. Comparatively, the network… pic.twitter.com/NixLFnzJCV
— Vini Barbosa (@vinibarbosabr) July 30, 2024
This figure marks a substantial decrease from the network’s peak performance in March. At that time, Cardano confirmed over $11.56 billion in daily transactions. The current volume represents less than 15% of the March high.
ADA Price Movement
The price of ADA has decreased in sync with a slump in transaction volume. Barbosa noted that ADA now trades at about $0.40, which is 48% less than its $0.77 exchange rate from March.
However, this price decline is less severe than the drop in network activity. Besides, analyzing ADA’s daily price chart adds to the bearish sentiment, ADA is in a doward trend, trading below the 50 and 100 EMAs.
ADA price chart Source: TradingView
The price is near the lower Bollinger Band, indicating the potential oversold conditions, though the widening bands suggest increasing volatility.
Moreover, the MACD is bearish, with the histogram showing increasing bearish momentum. The RSI is below 50, indicating weak momentum, with room to move lower before reaching oversold conditions.
Resistance is at $0.4570, and immediate support is at $0.3898. A break below the support could lead to further downside, while a move above the resistance might signal a potential trend reversal.
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NVT Ratio Analysis
Despite the downturn in transaction volume, Cardano’s NVT ratio remains notably low. Barbosa reported that Cardano’s NVT ratio on July 30 was 9.16. This metric divides a crypto’s market cap by its network’s transaction volume or circulating tokens.
A lower NVT ratio typically indicates that an asset is less likely to be overvalued. Barbosa, for reference, compared Ethereum and Bitcoin NVT with that of ADA’s.
The NVT ratios for Ethereum and Bitcoin are 166 and 251, respectively. These figures are 27 and 18 times higher than Cardano’s NVT. This difference suggests that Cardano’s market cap is more balanced with its network activity compared to the two leading assets.
Barbosa emphasized this point, stating,
“These ratios are 27 and 18 times higher than the ADA’s indicator, suggesting that, despite the recent drop, Cardano’s market cap is far more balanced with its network’s transaction volume than the two leaders.”
Implications for Cardano
The low NVT ratio could be interpreted as a positive sign for Cardano. It suggests that the network’s valuation is more closely aligned with its actual usage compared to other major cryptos. This balance might indicate that Cardano is less susceptible to overvaluation risks.
However, the declining transaction volume remains a concern. It could signal reduced network activity or a shift in how users interact with the Cardano blockchain.
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