In early December, Cardano (ADA) found itself in a stabilization zone regarding its price. However, recent trends show a depreciation, with its value dropping by 17% over the past week alone. This downturn is primarily attributed to the strategic sell-offs by major holders and a wave of profit-taking actions by current investors. These factors suggest an increased likelihood that the cryptocurrency may remain under the $1 mark shortly, as this analysis elaborates.
Evidence of the decline in Cardano’s appeal among its large holders is seen in the substantial decrease in net inflow among these investors, tracked through IntoTheBlock’s data. Over the last seven days, the net flow reduction has reached 139%, signaling a significant retreat in ADA accumulation by these influential entities.
Such holders are identified as those controlling over 0.1% of Cardano's total supply. A reduced net flow signifies these whales reducing their stakes, which is typically seen as a bearish indicator. It suggests a potential loss of confidence among these large investors about ADA's future trajectory.
This trend isn’t confined to large holders alone. An increase in profit-taking across the broader ADA investor base points to a widespread decline in confidence regarding the asset's future value.
Further justifying this sentiment is the altcoin’s Market Value to Realized Value (MVRV) ratio, which has consistently declined. Santiment reports that the MVRV ratio has dropped from its peak of 113% on December 2 to 72.35%. This metric assesses if an asset is undervalued or overvalued compared to its owners' average acquisition cost, and a decrease typically indicates narrowing between market value and actual value.
Although still positive, the declining MVRV ratio indicates that holders are realizing their gains, thereby diminishing nearly unrealized profits. This trend reveals diminishing bullish sentiment and escalating selling pressure within the market.
From a technical lens, ADA's daily chart reveals that the next critical support level is $0.90. Currently trading at $1.01, ongoing profit-taking could see ADA challenging this support. Should it fail to maintain this level, a reduction to $0.77 is possible.
Conversely, a resurgence in purchasing could see ADA’s price rebound to $1.06, potentially escalating toward a two-year high of $1.32.