Cardano (ADA) price has declined by approximately 18% in the last seven days, aligning with the broader market condition after a period of steady rally. But in addition to the price, the activity of the Cardano network has also been affected.
This overall drop around the project has raised concerns about the short-term performance of the altcoin. Based on this chain analysis, those concerns may be valid.
Cardano encounters a major obstacle
On December 8, Cardano price rose to a yearly high of $1.22. But today, the value of the cryptocurrency has dropped to $0.88 due to notable sell-offs. While ADA holders may anticipate a bounce in the short period, the in-money-out-of-money price (IOMAP) shows that it could be challenging.
The IOMAP is an indicator that detects support and resistance on the chain. To do this, the indicator compares addresses that currently have unrealized profits with those that have losses. Typically, the greater the volume in a price range, the stronger the support or resistance.
According to IntoTheBlock, the main resistance for ADA is around $0.92. In this area, 58,470 Cardano addresses accumulated 951.02 million tokens, which is more than the token money between $0.74 and $0.88.
Cardano enters or leaves money around the price. Source: IntoTheBlock
If the buying pressure remains low, then ADA price might struggle to break above the current price. Instead, the token could see a prolonged correction.
Data from Santiment supports this sentiment and highlights a significant drop in Cardano network activity. On December 16, the number of addresses active 24 hours a day exceeded 51,000, but at press time this figure had fallen to 32,700.
An active address is defined as a wallet involved in a successful transaction, either as a sender or a receiver, during a given period. This metric serves as a strong indicator of daily user activity on the blockchain.
Cardano active addresses. Source: Sentiment
An increase in active addresses indicates higher user participation, which is usually bullish for price action. Therefore, the current drop in this metric suggests bearish sentiment around ADA.
ADA Price Prediction: Inevitable Extended Correction
From a technical perspective, the exponential moving average (EMA) suggests that Cardano price could continue to decline. The EMA is an indicator that measures the trend around a cryptocurrency.
On the daily chart, ADA price has fallen below the 20 EMA (blue). Falling below the EMA suggests a bearish outlook. Furthermore, the token value is roughly in the same place as the 50 EMA (yellow).
This position indicates that Cardano is about to lose the $0.88 support. If this remains the same, ADA price could decline to $0.77. In a very bearish scenario, the value of the altcoin could fall to $0.55.
Cardano daily analysis. Source: TradingView
However, if Cardano network activity increases, this trend could change. In that scenario, the value of the cryptocurrency could jump to $1.33.
