The ongoing cryptocurrency bear market has created a crisis of confidence for Cardano, with nearly 90% of ADA token holders currently sitting on losses.
This overwhelming capitulation poses a significant threat to the long-term viability of the blockchain project. According to data from Into The Block, around 4 million Cardano addresses are underwater on their ADA holdings as of mid-August 2023.
The hardest hit investors are those who bought around the all-time highs near $3 last year during a frenzy of speculative hype. About 690,000 addresses sitting on substantial losses purchased at an average price of $2.14.
Making matters worse, approximately 482,000 addresses acquired ADA at $0.39 on average and are now down by over 80% from those levels. This grouping holds a massive 8.9 billion ADA tokens that are drastically underwater.
The plunge in Cardano’s token value highlights a broader loss of faith and momentum. After surging to unsustainable heights in 2021 amid a speculative mania, the project has failed to deliver on the promised technology.
With bearish technical momentum intact, additional capitulation toward the $0.25 level remains a real danger. This could spark a negative feedback loop of selling begetting more selling.
To emerge from its current crisis, Cardano desperately needs a major rally to rebuild confidence among its loyal community. But faith may be difficult to restore after such devastating losses for the vast majority of token holders.
Trade Setup and Analysis
Following a bullish breakout from an Ascending Triangle pattern, price reached the target of $0.35 (200-day Moving Average). However, it failed to break above the 200-day MA, which is needed to confirm a trend reversal to an Uptrend.
Price has pulled back and broken below the $0.30 support level, resuming its downtrend. Cardano could revisit $0.25 based on the breakdown, according to altFINS.
The overall trend remains in a Downtrend across short, medium and long-term timeframes. Momentum is also bearish with the MACD line below the signal line and Relative Strength Index below 45.
Nearest support is at $0.25, then $0.22. Resistance is at $0.30 (previous support), then $0.42.
With the majority of holders underwater, it may take a significant recovery rally for Cardano to emerge from its current crypto winter. But the blockchain project maintains a loyal following, hoping for a return to former highs.
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