- Cardano’s NVT ratio has been on an upward trend since mid-March, raising questions about the future performance of ADA.
- Despite high development activity, social media engagement and user activity have been falling in the past six weeks.
- The NVT and mean coin age metrics pose a dilemma to investors, indicating both overvaluation and accumulation.
Cardano’s NVT ratio is trending higher, but falling social engagement and user activity cast a shadow over ADA’s future performance. Are these indicators of a change in ADA’s fortunes?
Cardano’s Bearish Bias and Lack of Demand
Despite high development activity, Cardano [ADA] has been unable to shake off its bearish bias. Technical analysis reveals that further losses are likely for the token due to a lack of demand and negligible bullish sentiment. With Bitcoin [BTC] unable to break out of the $60.8k-$63.3k region, Cardano is also stuck within the $0.43-$0.47 area. The question remains whether on-chain metrics hint at a bullish breakout or reinforce the bearish expectations.
High Development Activity but Declining User Engagement
While high development activity is a positive sign for long-term investors, other metrics such as daily active addresses and social volume have been in decline since mid-March. This indicates fewer users are utilizing the network for transactions and that social media engagements have fallen off. The Weighted Sentiment has been negative for a good chunk of the past six weeks, indicating negative or bearish online engagement. However, these factors alone do not indicate a drop is imminent.
Contradicting Signs: Is ADA Undervalued or Overvalued?
The 30-day MVRV ratio has been negative since mid-March, indicating an extremely undervalued asset in the short-term. However, despite this development, the price trend has been bearish. During this time, the mean coin age has trended rapidly higher, indicating accumulation. This presents a good opportunity for swing traders to buy, as ADA is also at the range low. Yet, the NVT reveals something else. The Network Value to Transactions (NVT) ratio calculated using the daily circulation has also trended higher since mid-March, indicating that the network is likely overvalued, or expensive, compared to its low ability to transact tokens. This has bearish implications for the network usage, and in turn, the future demand.
Conclusion
Putting these clues together with the technical analysis, it appears that Cardano is likely headed for more losses. A Bitcoin breakout might halt or reverse the downtrend, but the evidence at hand is not bullish. Therefore, investors should approach ADA with caution, keeping a close eye on both on-chain metrics and broader market trends.
