Cardano (ADA) has been caught in the crossfire of recent market trends, experiencing a 12% drop in the past 10 days and closing May 2024 at a concerning $0.44. This bearish sentiment coincides with the surging popularity of Ethereum (ETH) following the long-awaited ETF approval. Let’s delve deeper into the factors behind ADA’s slump and explore potential price forecasts.
Ethereum’s Shine Dims Cardano’s Light
The recent Ethereum ETF news appears to have shifted investor focus, with retail traders gravitating towards ETH for potentially higher returns. This dynamic is evident in ADA’s price action, which saw a steady decline as ETH markets experienced bullish momentum.
The bearish trend isn’t limited to speculation. On-chain data reveals a significant drop in activity across Cardano’s native DeFi protocols this week, translating to reduced network revenue. IntoTheBlock’s chart showcases a dramatic decline in daily transaction fees, plummeting 63% from its 2024 peak in March. This marks the lowest level since 2021, suggesting a decline in network usage and demand for Cardano’s services.
Staking Rewards Under Threat
This drop in fees has a cascading effect on Cardano’s Proof-of-Stake (PoS) model. Lower revenue translates to reduced staking rewards for those who secure the network. This scenario could incentivize stakers to withdraw their ADA and seek more profitable staking opportunities, potentially fueling a further price decline.
Technical Analysis: A Precipitous Drop or a Temporary Blip?
Cardano has twice dipped below the crucial $0.45 support level in the past two days. The bearish trend, coupled with the historically low transaction fees, suggests a potential downward spiral towards $0.40. However, a glimmer of hope remains. IntoTheBlock’s GIOM data indicates a potential buying wall at $0.43. If these holders stand firm, ADA could experience a temporary rebound.
The future of Cardano’s price hinges on a delicate balance. If the bearish sentiment prevails, a reversal to $0.40 seems likely. However, a market swing towards optimism could see ADA climb back above $0.45 and potentially reach the next resistance level at $0.46. Only time will tell if Cardano can weather the current storm or succumb to the selling pressure.
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