Cardano (ADA) has been undergoing a correction since reaching a 20-month high of $0.68 in mid-December. The Relative Strength Index (RSI) on ADA’s daily chart exceeded 70, indicating overbought conditions, prompting investors to take profits. The correction is part of a cycle that began after the peak, with ADA’s price continuing to decline within a descending parallel channel.
The RSI’s current level around 40 reflects a bearish market sentiment. Data from TokenTerminal shows that the ADA price drop coincides with a decrease in transaction volume and the number of core developers since mid-December. The number of unique GitHub contributors to Cardano’s public repository has dropped by 25% from 164 developers on December 10, 2023, to 123 on January 18.
Additionally, ADA’s transaction volume plummeted by 87% from approximately $2.34 billion to $304 million in the same period. CoinMarketCap data reveals a similar trend, with ADA’s daily transaction volume falling from about $1.165 billion to $381 million, aligning with a 27% price drop in ADA during that timeframe.
The broader crypto market is correcting from its peak, reflecting the pattern seen in ADA’s performance. Factors contributing to increased selling pressure include a decrease in the Crypto Fear and Greed Index and sales focused on spot Bitcoin ETFs. Bitcoin has faced significant selling pressure, with its price dropping to $40,000 on January 12, likely due to investors shifting to Bitcoin ETF products with lower fees.
The Crypto Fear and Greed Index retreated from the greed zone to a neutral level on January 19, indicating a decline in market sentiment. This neutral sentiment suggests market participants are cautiously waiting to determine the market’s short-term direction, possibly contributing to the current market correction.