- Cardano has fallen 17% in seven days as bearish trends intensify.
- The network has recorded a decline in DeFi TVL and active addresses, fueling the downward trend.
Earlier this month, Cardano [ADA] saw its market capitalization surpass $40 billion for the first time since 2022. This growth came amid a massive rally that pushed ADA to a multi-year high of $1.32.
Cardano’s rally has since cooled, as the price stood at $1.02 at the time of writing, marking a decline of 17% in seven days. Its market capitalization has also fallen to $35 billion. This bearish reversal can be attributed to several factors.
Cardano’s DeFi TVL falls from record highs
Cardano’s decentralized finance (DeFi) Total Value Locked (TVL) hit an all-time high of $708 million on December 3, coinciding with ADA’s rally to a multi-year high. Per DeFiLlamathis TVL has since fallen sharply along with the price to $611 million.
Cardano’s DeFi volumes have also fallen from a peak of $31 million to $16 million, highlighting the reduced use of the network in the DeFi sector.
Source: DeFiLlama
The largest DeFi protocol on Cardano is the Liqwid lending platform, whose TVL has fallen 16% in one week. Decentralized exchange Minswap (DEX) has also recorded a similar decline.
Judging from past trends, ADA’s rally tends to coincide with rising DeFi activity. Therefore, reduced usage could continue to dampen the price outlook.
Active addresses reached a weekly low
Usage on the Cardano network has also seen a notable decline, with the number of daily active addresses falling to the lowest level in seven days.
Data from IntoTheBlock shows that Cardano’s active addresses dropped by 45% from 96,740 to 52,380 in just one week. The new addresses created on the network have registered a similar drop from 32,590 to 16,190.
Source: IntoTheBlock
The decrease in the number of active addresses indicates reduced interest and weak demand for ADA. It also signals reduced investor confidence, which could result in bearish sentiment.
Cardano whale balances are falling
Major Cardano addresses have recorded a significant drop in their holdings, per IntoTheBlock, which could push Whales toward a distribution phase.
Addresses with between $100,000 and $1 million in ADA have seen their balances drop from $6.61 billion to $5.59 billion.
At the same time, addresses with tokens between $1 million and $10 million have also seen a drop of more than $1 billion in their holdings.
Source: IntoTheBlock
This decline does not necessarily mean that whales are being sold. Instead, it indicates that the value of their assets has fallen, which could lead to profit-taking.
Realistic or not, here is the market cap of ADA in terms of BTC
Will ADA break away from these bearish trends?
ADA could continue the bearish trends if the Cardano network fails to register an uptick in activity. Furthermore, a lack of new demand to absorb the coins being sold by traders looking to minimize their losses could fuel the downtrend.
Traders should beware of an increase in the number of active addresses, DeFi activity, and whale accumulation as this could precede an upward recovery. Furthermore, a recovery in the broader market could also support ADA’s bullish reversal.