In recent weeks, Cardano [ADA] has experienced a consistent downward trend. However, with the crypto market rebounding due to Bitcoin’s surge to $72k, ADA has shown signs of a modest recovery on daily price charts.
As of the latest update, Cardano is currently trading at $0.358, marking a 3.81% increase in the last 24 hours.
Prior to this upturn, ADA had been on a decline, dropping by 8.0%. With the overall market sentiment still bearish, analysts are cautious about the possibility of further decline.
According to insights from analysts at IntoTheBlock, the rising NVT Ratio indicates a potential downturn in ADA’s valuation.
Cardano Sees a Spike in NVT Ratio to a 5-Month Peak
Reports from IntoTheBlock reveal that Cardano’s NVT ratio has reached its highest level since June, suggesting a reduction in on-chain activities in relation to its price increase.
When an asset’s NVT ratio is elevated, it implies that ADA is potentially overpriced. This is supported by recent underperformance of ADA, indicating a possible future downtrend for the altcoin.
Historical data analysis shows that a high NVT ratio often precedes a decline in price, emphasizing the importance of increased on-chain activity for sustaining ADA’s upward momentum.
Therefore, without a boost in on-chain engagements, Cardano may struggle to maintain its current price levels and could face further downward pressure.
Implications for ADA’s Price Trends
As highlighted by IntoTheBlock’s analysis, reduced on-chain activities typically signal a negative outlook for ADA’s price trajectory.
Although ADA has enjoyed some recent gains, the overall market sentiment remains pessimistic, as indicated by a significant increase in large holders’ outflows over the past week.
According to data from IntoTheBlock, the outflow from large holders spiked from 10.84 million ADA tokens to 100.88 million, marking an 830.63% surge. This significant move suggests that whales and major holders are either cutting their losses or capitalizing on recent profits, reflecting a lack of confidence in ADA’s future prospects.
Furthermore, a decline in large holders’ netflow from 56.1 million to -8.87 million underscores a trend of more assets exiting than entering the market, indicating a challenge for ADA to maintain its upward momentum.
In conclusion, ADA has been struggling to break out of a descending channel over the past month amidst prevailing negative sentiment. For ADA to stage a significant price rally, a notable increase in on-chain activity is required according to IntoTheBlock’s assessments.
If ADA fails to attract such activity, it could potentially drop to $0.32. However, a strong surge in momentum could push ADA towards the $0.38 mark in the near term, signaling a potential shift in the current market dynamics.