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Cardano, the 11th largest cryptocurrency by market capitalization, is currently at a critical juncture, with the ADA price showing signs of a potential breakout. However, on-chain metrics paint a more complex picture.
According to data from IntoTheBlock, Cardano's Network Value to Transactions (NVT) ratio has surged to its highest level since June. However, this indicates a significant decrease in on-chain activity relative to its price growth.
The NVT ratio is a key indicator that compares a cryptocurrency's market capitalization to its transaction volume. A rising NVT ratio shows that price increases may not be accompanied by an increase in on-chain activity, perhaps indicating overvaluation.
For Cardano, this classic overvaluation signal remains notable given ADA's recent underperformance, which has seen it plummet 11.4% in the last 30 days.
Tomiwabold OlajideHistorically, elevated NVT ratios have often preceded price pullbacks, which suggests that without an increase in on-chain engagement, Cardano's price might struggle to maintain momentum.
Given this, there remains a potential for further downside in ADA's price, IntoTheBlock stated, with the lack of on-chain activity suggesting that the recent price increase was driven primarily by speculation.
Cardano eyes potential breakout
Cardano (ADA) begin to rise after hitting support at lows of $0.31 on Oct. 25. The climb has continued in the last three days, and ADA might mark the fourth day of gains if today closes in the green.
Today's rise to intraday highs of $0.351 has brought ADA closer to the daily SMA 50 at $0.355, a barrier which, if surpassed, might see the price targeting the daily SMA 200 at $0.397. Cardano's price has been confined by its daily moving averages of 50 and 200 since March 2024.
Thus, a sustained breakout above the daily moving averages would allow ADA to exit its current range trading and signal a bullish comeback. In this scenario, ADA might aim for new yearly highs past $0.76.
Expectations are high regarding Cardano blockchain's two-part Chang Hard Fork, a significant upgrade to enhance network functionality and decentralized governance. This upgrade might boost Cardano on-chain activity and perhaps trigger a breakout for the ADA price.
Whether the indications presented by the NVT signal would be validated remains unknown, as well as where the ADA price trends next.
Gamza Khanzadaev
Vladislav Sopov
Dan Burgin