Cardano (ADA), one of the prominent layer-1 cryptocurrencies, has experienced a dramatic price decline, losing over 20% of its value since reaching a yearly high of $1.326. As of now, ADA trades around $0.90, raising concerns about its potential for further depreciation. Such a sharp downturn highlights the volatile nature of cryptocurrencies and indicates underlying issues affecting investor confidence. Notably, seasoned trader Peter Brandt has pointed to specific technical indicators suggesting that Cardano may have even more downside ahead, particularly emphasizing the ominous development of a head and shoulders pattern on both the daily and four-hour charts.
The head and shoulders pattern is a significant bearish indicator in technical analysis. In Cardano’s case, the formation includes two shoulders at approximately $1.153 and a head at $1.327, with a neckline positioned at $0.914. This pattern typically signals that the asset is set to decline further, as it often results in a robust bearish breakdown. Brandt’s analysis suggests that if the price continues to follow this pattern, Cardano could plummet to around $0.629—a drop that would place it significantly below the critical 61.8% Fibonacci retracement level. Such a projection, if realized, could translate into almost a 32% drop from its current trading price, further shaking the confidence of its investors.
While the technical outlook for Cardano raises alarms, the fundamentals paint an equally concerning picture. Recent data indicates that Cardano’s position within the DeFi space is deteriorating. According to DeFi Llama, the total value locked (TVL) in Cardano has diminished from over $700 million in November to about $478 million today. This decline is significant, particularly given the competitive landscape of layer-1 networks like Solana and Ethereum, which continue to attract greater investment and user activity.
Moreover, Cardano’s user engagement has notably dwindled. The decline in daily active addresses—from nearly 210,000 in November to approximately 66,500—reveals a substantial drop in participation. This trend is a critical indicator of user interest, suggesting that many investors may be opting to exit or are becoming disillusioned with Cardano’s prospects.
The sentiment surrounding Cardano is further exacerbated by decreasing demand in the futures market. The futures open interest for ADA has seen a downward trend, dwindling from over $1.1 billion to about $775 million. This metric is pivotal as it reflects the volume of unfilled orders in the futures market, often correlating with overall market demand. A declining open interest signals a weakening position for Cardano in a rapidly evolving cryptocurrency landscape.
Cardano faces a confluence of technical and fundamental challenges that suggest a troubling trajectory. Investors should heed the warnings from technical analysis while also recognizing the gravity of the declining engagement metrics. As this cryptocurrency continues to navigate a competitive market, the question remains: can Cardano regain its footing, or is a more extended downturn imminent?
