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Home » What’s Missing for Cardano’s Price Recovery?

What’s Missing for Cardano’s Price Recovery?

What's Missing for Cardano's Price Recovery?

ADA’s price has risen in this bull cycle but not to the level of other cryptocurrencies.

  • Cardano’s upcoming update could improve application development and attract new ones.
  • There is increased investment in ADA not seen in other cryptocurrencies.

The price of the eighth largest market cap cryptocurrency, Cardano (ADA), has been on an uptrend since a month ago. It raised from $0.45 to $0.64 (USD). ADA has declined to around $0.60. Thus, the market is not yet showing the strength to return to $0.67. It’s more than one year high touched two months ago. This drop occurred in the face of Bitcoin’s (BTC) pullback that pushed down crypto.

Cardano ADA price evolution
Cardano ADA price evolution (Source: Yahoo Finance)

Chang and Plutus Upgrade

If Plutus V3 finds its way to the main Cardano network, it would theoretically be a significant upgrade,” says Market analyst Mike Fay. Plutus would bring the network in line with industry standards, he noted in a report. In this regard, he suggests that this scenario benefits ADA’s price. Plutus V3 is a Cardano upgrade scheduled for Q1 2024. It seeks to improve efficiency and ease of use for building on the network. “All key to encouraging developer adoption,” Fay said.

The main takeaway for investors is that Plutus V3 would enable better application development in the Cardano ecosystem,” he said. He added that it could drive the migration of smart contracts from other networks to Cardano. The specialist clarified that, while this is highly speculative, it appears to be a crucial step in Cardano’s continued development. It could lead to further growth of stablecoins on the network.

However, he made the caveat that Bitcoin’s halving expected in April could generate a temporary “significant pullback” on the price of cryptocurrencies, including ADA. As BTC is the largest capitalized digital currency, whatever happens to its price tends to cause a ripple effect on the rest if they do not have a strong narrative. In parallel, Rekt Capital stated that a pullback to halving is a clear case of “a selling of the news” event. This trading strategy refers to selling an asset when an event that previously motivated its demand due to positive expectations is approaching or materializes.

A drop in ADA could be a buying opportunity, according to Fay.

If we get a broad pullback, I would consider taking a more direct position in ADA if the growth of the network justifies the move,” Fay reveals. However, he clarifies that he does not yet see such growth possible. He believes that the slow increase in new ADA addresses while there are fewer and fewer active ones indicates “disappointing adoption.” The ratio of active addresses on Cardano is currently near multi-year lows, below 1%. “For a network that offers lower-cost transactions compared to more established networks like Ethereum and Bitcoin, this is a disappointing ratio,” opined the analyst.

Cardano actice addresses count
Cardano active addresses count (Source: Messari)

Active addresses in Cardano. Source: Mike Fay.

In addition, Fay details that the total value locked (TVL) on Cardano has increased. However, it was driven primarily by the rise in ADA pricing, not because of increased activity. However, he argued that it does reflect some “positive signs.” Decentralized applications (dApps) on the network grew by 65%. A recent report from analyst firm Messari further indicated that the capitalization of stablecoins in Cardano increased by 673% in 2023. Thus, this is a positive factor for the market. Fay notes that stablecoins such as DJED have experienced a decline in LTV in 2024, which “is disappointing.”

Despite the low activity, interest in Cardano in ETFs grows

Fay distinguishes that, beyond the low Cardano activity, there is a green light in the market in investment products such as ETFs. So far this year alone, instruments of this type that expose themselves to the currency have raised $11 million. Such a figure is close to the amount it recorded in 2023, which was $14 million. Meanwhile, other crypto asset-based products, except bitcoin-based crypto, have recorded outflows or low inflows these first two months of the year. The movement shows, says Fay, that “there is a noticeable increase in the pace of ADA allocation that we don’t necessarily see across all altcoins.”

As long as these inflows continue to grow, they will drive the price of ADA higher. One factor that could motivate this scenario is an altseason, i.e., a season when altcoins outperform bitcoin. An altseason occurs when Bitcoin’s uptrend motivates widespread demand for cryptocurrencies. There are expectations that this phenomenon could happen this year if BTC continues to rise. In a conclusion, Fay argues that Cardano “needs a catalyst.”

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