Cardano Faces Price Decline Amid Reducing Network Activity and Diminished User Engagement

• Cardano (ADA) is facing significant downward pressure as network growth declines and user engagement diminishes, resulting in a notable price drop this week.

• The price of ADA has decreased by 7.4% over the past 72 hours, trading at $0.338 as of October 25, effectively wiping out gains made earlier in the week.

• “The decline in ADA’s price reflects shifting investor sentiment and a broader bearish trend among many altcoins,” market analysts warn.

Cardano struggles with a 7.4% price drop amid reducing user engagement, highlighting the altcoin’s recent challenges and bearish market trends.

Network Activity and Its Impact on ADA Prices

The recent performance of Cardano (ADA) has raised concerns among investors. The cryptocurrency has experienced a significant downturn in user engagement, evident from the decrease in active addresses on the Cardano network. The number of active addresses has plummeted from 71,270 on March 6 to just 25,680, according to data from IntoTheBlock.

Declining Total Value Locked (TVL) on Cardano

In conjunction with falling user engagement, the total value locked (TVL) on Cardano is witnessing a downward trajectory. As per DefiLlama, TVL has decreased over 55%, from approximately $480.72 million in March to about $214.8 million currently. This trend signals that fewer users are interacting with the ecosystem, negatively affecting the demand for ADA tokens.

ADA’s Underperformance Compared to Bitcoin

ADA’s struggles have not occurred in isolation, as it continues to underperform compared to Bitcoin (BTC). Year-to-date, BTC has surged approximately 52%, while ADA has declined by 43%. This stark contrast has led to a growing mismatch in the ADA/BTC trading ratio, which has dropped to a near-all-time low of $0.00000503 on October 25, reflecting eroding investor confidence in ADA.

Market Sentiment and Bearish Trends

The prevailing market sentiment has added to Cardano’s challenges. With many altcoins under pressure, ADA’s recent performance mirrors that of others like Ether (ETH) and Avalanche (AVAX), both of which experienced price drops of about 2% in the last 24 hours. These trends further suggest a bearish cloud hanging over the altcoin market, contributing to the negative sentiment surrounding ADA.

Technical Analysis: Bearish Divergence

Additionally, ADA’s recent price movements reveal a bearish divergence. Between September 17 and October 20, ADA’s price formed higher lows while the daily Relative Strength Index (RSI) showed a descent with lower lows. This divergence serves as a warning signal in technical analysis, as it often indicates potential weakness in an uptrend. Traders are likely to take this as an opportunity to liquidate positions before further declines.

Conclusion

The combination of diminishing network activity, reduced TVL, and the bearish divergence indicates that ADA is grappling with significant challenges. As user engagement continues to fall and investor sentiment shifts negatively, ADA’s price outlook remains uncertain. Investors should monitor these developments closely while considering the larger market dynamics at play.