Cardano (ADA) experienced a turbulent April, mirroring the broader crypto market’s cautious stance following Bitcoin’s halving. Despite the community’s optimism surrounding the Ouroboros Genesis hardfork, ADA plummeted to $0.43 on May 1st, its lowest point since April 13th.
DeFi Downturn: The Hidden Bearish Driver
While the Ouroboros Genesis rollout failed to spark a rally, on-chain data suggests a deeper bearish catalyst: the Cardano DeFi ecosystem. Since March 1st, the Total Value Locked (TVL) within Cardano DeFi protocols has dropped by a staggering 119.2 million ADA, currently sitting at 589.6 million.
This decline in TVL signifies two critical factors:
- Reduced Short-Term Supply: When ADA is locked in DeFi protocols, it temporarily reduces the circulating supply, potentially leading to increased selling pressure if demand remains stagnant.
- Waning Investor Confidence: A sustained TVL drop indicates reduced liquidity and activity within the Cardano DeFi space, potentially reflecting a decline in investor confidence.
$0.30 Target in Sight?
The 119.2 million ADA exodus from DeFi smart contracts translates to roughly $50 million added to the short-term market supply. This, coupled with the bearish sentiment, could push ADA towards $0.30 in the coming weeks.
However, a potential lifeline exists: IntoTheBlock’s data reveals a sell-wall at $0.40, where 379,980 addresses hold 3.67 billion ADA. If these holders panic-sell to protect their positions, it could provide temporary support for the bulls.
Bullish Reversal or Free Fall?
If the bulls fail to reclaim the $0.40 support, ADA could enter a free fall towards $0.30. Conversely, a decisive rebound above $0.50 could signal a positive reversal in Cardano’s price trajectory.
With the current bearish pressures and on-chain metrics pointing towards DeFi’s role in the decline, the coming weeks will be crucial for Cardano’s price action.
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