Cardano (ADA), the 11th largest cryptocurrency by market cap, finds itself in a touchy spot: its price is near a potential breakout. However, recent price trends and technical indicators paint a tantalizing mosaic of where and how we might profit, but the on-chain data paints a much less comforting picture.
According to data on blockchain analytics platform IntoTheBlock, Cardano’s Network Value to Transactions (NVT) ratio has spiked more than any other point since June. However, as shown by this measure comparing the market cap of a cryptocurrency to its transaction volume, this rise is often an indication of market overvaluation if there is no increase in on chain activity to justify the rise.
Cardano Awaits Crucial Hard Fork
In the case of Cardano, this NVT spike could be a result of a divergence between the rise of its price and actual network use, a classic signal for price increases not based on blockchain activity. It’s interesting, then, that ADA has recently been down, with a 11.4 percent decline over the last to month.
For history, high NVT ratios are usually followed by price pullbacks, and if on chain activity doesn’t increase, it could be harder for ADA to maintain the upward momentum. IntoTheBlock says the price rise has probably been mostly speculative, without the kind of fundamental support of growing network activity.
But Cardano’s price has held up in recent days. ADA has bounced back from $0.31 on October 25, making an intraday high of $0.351 today. Closer to the 50 day Simple Moving Average (SMA) $0.355 technical line, this brings ADA closer to the more robust 200 day SMA at $0.397.
ADA’s price has been contained within these moving averages since March, and if broken out of again a bullish resurgence and a rise above $0.76 in new highs for the asset could be on the cards.
The prospect of ADA’s future is further buoyed with the upcoming two part Chang Hard Fork of the Cardano blockchain, an important network update meant to address the functionality and decentralization features within the network. This update is expected to kick start a resurgence of on-chain activity, which will be a much required boost to ADA’s fundamentals.
Still, analysts are cautious as ADA comes to a critical juncture. High NVT signals over valuation but network upgrades and technical levels may provide support for further rises. The result can determine Cardano’s path for the rest of 2024.
