Cardano, the tenth-largest cryptocurrency by market cap, may be worth watching, as one indicator suggests it may be severely undervalued, according to U.Today. One key indicator that points to ADA being undervalued is the "supply profitability ratio." The supply profitability ratio is calculated by comparing the acquisition price and the current price of each unit of the cryptocurrency, and then evaluating the proportion of the supply that is currently in a profitable state. When the supply profitability ratio of an asset is high, it usually indicates that most holders bought the asset at a lower price. These ratios can surge during bull runs, such as from October 2023 to March 2024, and the gains are often correlated with overbought indicators. However, the supply profitability ratio indicator is best used in conjunction with other indicators, such as whale accumulation and MVRV.
In a recent tweet, on-chain analytics firm Santiment shared the supply profitability of major cryptocurrencies Bitcoin, Ethereum, XRP, Cardano, Dogecoin, and Chainlink, which are 89.9%, 84%, 77%, 51.9%, 76.7%, and 78.2%, respectively. Santiment recommends focusing on cryptocurrencies with lower supply profitability, as they may generally indicate undervaluation compared to the rest of the market. This may apply to Cardano, which has a lower supply profitability compared to other major cryptocurrencies.
The supply profitability ratio indicates that 51.9% of the circulating ADA is in a state of "profit". This may indicate that Cardano is about to rebound. At the time of writing, Cardano is down 3% in the past 24 hours to $0.453 and down 6.52% in the past seven days. Cardano is also far below its all-time high, down 85.38% from its all-time high of $3.10 reached on September 2, 2021. Recent analysis from on-chain analysis firm IntoTheBlock suggests that ADA "stands out" from other Layer 1 networks, with only 35% of holders in a state of profit. Whether this is an opportunity or a warning sign is yet to be known.
