- Cardano fell 17% in 7 days as bearish trends intensify.
- The network saw a drop in TVL and active DeFi addresses, which fueled the downward trend.
Earlier this month, Cardano (ADA) saw its market cap surpass $40 billion for the first time since 2022. This growth occurred amid a massive rally that pushed ADA to a multi-year high of $1.32.
Cardano’s rally has since slowed, as at press time it was trading at $1.02, down 17% in seven days. Its market capitalization has also fallen to $35 billion. This bearish reversal could be attributed to several factors.
Cardano’s DeFi TVL falls from record low
Cardano’s decentralized finance (DeFi) total value locked (TVL) reached an all-time high of $708 million on December 3, coinciding with ADA’s rally to a multi-year high. By DeFiLlamathis TVL has since declined sharply, along with the price to $611 million.
Cardano’s DeFi volumes also fell from a high of $31 million to $16 million, highlighting reduced network usage in the DeFi sector.
Source: DeFiLlama
The largest DeFi protocol on Cardano is lending platform Liqwid, whose TVL dropped 16% in a week. Decentralized exchange Minswap (DEX) also saw a similar decline.
Going by past trends, ADA’s rally tends to coincide with increased DeFi activity. Therefore, if usage is reduced, this could continue to weigh on the price outlook.
Active addresses hit weekly low
Usage on the Cardano network also saw a notable decline, with the number of daily active addresses falling to the lowest level in seven days.
Data from IntoTheBlock shows that in just one week, Cardano’s active addresses fell by 45%, from 96,740 to 52,380. New addresses created on the network saw a similar drop, from 32,590 to 16,190 .
Source: In the block
The decline in active addresses signals reduced interest and weak demand for ADA. This also indicates a loss of investor confidence, which could lead to bearish sentiment.
Cardano whale balances drop
Large Cardano addresses have seen a significant drop in their holdings by IntoTheBlock, which could push the whales into a distribution phase.
Addresses holding between $100,000 and $1 million in ADA saw their balances drop from $6.61 billion to $5.59 billion.
At the same time, addresses holding between $1 million and $10 million in tokens also saw their holdings drop by over $1 billion.
Source: In the block
This decline does not necessarily mean that whales are selling. Instead, it indicates that the value of their holdings has fallen, which could lead to profit-taking.
Realistic or not, here is the market capitalization of ADA in terms of BTC
Will ADA break free from these bearish trends?
ADA could continue downward trends if the Cardano network fails to see an uptick in activity. Additionally, the lack of new demand to absorb coins sold by traders looking to minimize losses could fuel the downtrend.
Traders should be wary of an increase in active addresses, DeFi activity, and whale accumulation, as this could precede an upward recovery. Additionally, a broader market recovery could also support ADA’s bullish reversal.
