Cardano Shows Signs of Bearishness: Dropped 14% in a Month

Cardano has ramped up its presence in the DeFi sector but failed to break through the $1 price level

Cardano is one of the key players in the cryptocurrency market. It recently introduced its Hydra Scaling Solution and has also started to influence the P2E gaming space with several Cardano-based games. In April alone, over 65 million Cardano transactions took place, with Cardano continuing to dominate transaction volume in May.

At the time of writing, Cardano (ADA) was hovering around US$0.3729, 1.82% up from the previous day but it has dropped more than 14% in the past month. Market experts believe this Cardano decline has been caused by the recent crash in Bitcoin (BTC); resulting in a bearish trail for the altcoin as well.

Cardano's Hydra Scaling Solution Went Live

Hydra is a layer-2 scaling solution that will help Cardano achieve its goal to improve scalability on its blockchain. By allowing it to execute up to 1 million transactions per second. This is a huge step forward from layer-1 solutions like Bitcoin (BTC) and Ethereum (ETH). Which can only manage a tiny fraction of this traffic. Its launch came after several months of testing. According to its technical documentation, the protocol aims to increase transaction speed through low latency and high throughput and minimize transaction costs.

Hydra Head is the first protocol of the Hydra family and embodies the foundation for more advanced deployment scenarios relying on isomorphic, multi-party state channels. A payment channel allows for two or more parties to exchange funds according to a given off-chain protocol without having to commit all transactions to the underlying blockchain. They are historically one of the first kinds of layer 2 solutions to arise as an answer to scalability issues of permission-less ledgers (and consequently, they're also the most studied and known kind of solutions).

Other Notable Developments

Along with the Hydra head launch, the series of developments on Cardano is longer than you think. DJED is the first native decentralized stablecoin on the Cardano blockchain. DJED was first theorized by Input Output Global and was issued by COTI in 2023.

DeFi activities on the network have steadily risen during the past months. According to DeFillama data, the total value of assets locked on the network is currently $140.53 million.

Despite the developments, its token ADA is barely making any progress. ADA prices have stumbled more than 3% in a week and nearly 14% in the past 30 days, according to CoinMarketCap data.

Bearish Sentiment Lingers for ADA

The increased development activity and updates on important enhancements could not offset the negative sentiment caused by the ADA price fall. A reason behind growing investor pessimism could be the rapidly falling MVRV Ratio. This implied that most investors were holding their tokens at a loss. Cardano's (ADA) transaction volume surpassed $2 billion on only two occasions during Q1 of 2023. If this positive momentum continues, ADA investors can anticipate an early rebound in its price.

While the recent news of regulatory intervention in the collapse of First Republic Bank caused Cardano to lose its crucial $0.40 support on May 1, it's worth noting that Cardano whales remain resolute. These influential investors have increased their trading activity by an impressive 33% over the past week.

Dan Gambardello, the founder of Crypto Capital Venture and popular host of the YouTube channel of the same name, tweeted that Bitcoin and Cardano are poised for significant price increases, expecting Bitcoin to reach $200,000 and Cardano to hit $15. Before that, the veteran crypto enthusiast told his over 239,000 Twitter followers that he's been "building on Bitcoin and accumulating on Cardano" in what he calls "the ultimate crypto power play."