Cardano Faces Declining Active Addresses: Potential Factors Behind Recent Downtrend

• Cardano faces a significant downturn as its daily active addresses hit a weekly low, reflecting a broader trend of declining user engagement.

• In recent weeks, Cardano’s market capitalization has plunged, signaling investor concerns amid decreasing activity in its decentralized ecosystem.

• According to data from IntoTheBlock, the number of daily active addresses has dropped by **45%**, underscoring waning interest among ADA holders.

Cardano experiences a steep decline in daily active addresses and DeFi TVL, signaling bearish trends that may persist if user engagement does not rebound.

Cardano’s DeFi TVL drops from record highs

Cardano’s decentralized finance (DeFi) Total Value Locked (TVL) reached an all-time high of $708 million on 3rd December, coinciding with ADA’s rally to a multi-year high. Per DeFiLlama, this TVL has since declined sharply, alongside the price to $611 million. This drop marks a significant reduction of approximately **14%** in just a week.

Cardano’s DeFi volumes have also dropped from a peak of **$31 million** to **$16 million**, highlighting the network’s reduced usage in the DeFi sector. This reduction places additional pressure on Cardano’s price recovery as less activity typically correlates with diminishing price support.

Source: DeFiLlama

The largest DeFi protocol on Cardano is the Liqwid lending platform, which has seen its TVL decline by **16%** over the past week. Additionally, the Minswap decentralized exchange (DEX) is facing similar challenges, reflecting an overall downward trend in DeFi activity on the Cardano network. Going by past trends, ADA’s rally tends to coincide with rising DeFi activity. Therefore, if there is reduced usage, it could continue dampening the price outlook.

Active addresses hit a weekly low

Usage on the Cardano network has also recorded a notable decline, with the number of daily active addresses dropping to the lowest level in seven days. This sharp decline raises concerns about the network’s vitality.

Data from IntoTheBlock shows that in just one week, Cardano’s active addresses have plummeted by **45%** from **96,740** to **52,380**. Moreover, new addresses created on the network have experienced a similar drop from **32,590** to **16,190**. This trend may signal a broader disengagement from the platform.

Source: IntoTheBlock

The decline in active addresses signals reduced interest and weak demand for ADA. This trend also points towards diminished investor confidence, which could result in further bearish sentiment if not addressed promptly.

Cardano whale balances drop

Large Cardano addresses have recorded a significant drop in their holdings, per IntoTheBlock, indicating potential shifts among whale investors. This trend might push whales toward a distribution phase, characterized by selling pressure in the market backdrop.

The addresses holding between **$100,000** and **$1 million** worth of ADA have witnessed their balances decline from **$6.61 billion** to **$5.59 billion**. Additionally, addresses holding between **$1 million** and **$10 million** tokens have also seen a drop exceeding **$1 billion** in their total holdings. Such changes typically indicate either portfolio rebalancing or reactionary selling strategies by larger investors.

Source: IntoTheBlock

This drop does not necessarily suggest that whales are selling all of their ADA. Instead, it indicates that the value of their holdings has decreased, which could lead to profit-taking activity, especially if they perceive ongoing monetary pressure.

Will ADA break free from these bearish trends?

ADA could continue with the current bearish trends if the Cardano network fails to record an uptick in activity. Additionally, a lack of fresh demand to absorb coins being sold by traders looking to minimize losses could further fuel the downtrend. This scenario underlines the critical need for renewed interest in ADA and its associated services.

Traders should closely monitor any increases in active addresses, DeFi activity, and whale accumulation, as these factors could signal a potential upward recovery. Moreover, a recovery in the broader cryptocurrency market could also support a bullish turnaround for ADA.

Conclusion

The current decline in both active addresses and DeFi TVL for Cardano raises significant concerns about future price performance. If interest does not rebound soon, ADA may struggle to reclaim its previous highs, making it imperative for stakeholders to watch for signs of revitalization in network activity and broader market recovery.