According to a new report by Messari, published on August 4, 2023, the Cardano Total Value Locked (TVL) is up by 198.6% YTD (year-to-date) as of June 30, 2023. As the report states, this growth in TVL can be attributed to its ecosystem expansion and DeFi products.
Minswap was Cardano’s most used dApp in Q2, processing 1 million monthly transactions in May and June with an increase of 167.5% QoQ. It surpassed the leading NFT marketplace jpg.store for most dApp transactions.
“This aligned with an overall sectoral shift, as DeFi activity rose and NFT activity declined. Minswap remains the liquidity king of Cardano DeFi, ending Q2 with a TVL of $48.8 million and 32.2% dominance,” the report read.
But the number one reason behind this TVL growth is Cardano’s stablecoins, iUSD and DJED.
All of this network growth occurred despite the ADA price decline. With these fundamentals looking strong, will the price follow the network growth?
From its all-time high of $3.24, the price of ADA has fallen by 94%, measured to its lowest point in this bear cycle of $0.221 made on June 10 this year. Unlike some cryptocurrencies, which experienced further price appreciation in November 2021, the bear cycle for ADA started in September.
Also, ADA made its lowest low on June 10, while most altcoins made their lowest points on December 31, 2022, which can be seen on the chart above when comparing ADA and the TOTAL2 (market cap excluding Bitcoin).
The price has been in a continuous downward trend without major corrections. The momentum started slowing down after reaching the $0.40 level but continued for another lower low to $0.20. A horizontal range was formed between $0.20 and $0.41, revisited in February and April.
With the price testing the range’s low level again on June 10 and is currently in the mid-range at around $0.30, we could see it breakout to the upside soon.
As mentioned in the previous paragraph, the price of ADA could have started an upward move that will lead to a breakout above $0.41, which is the horizontal resistance level and indicates the start of a bull cycle.
This is according to a bullish count in which this whole correction from the ATH, which is a WXYXZ one, ended on June 10, 2023. In this count, the descending move from April 14 – June 10 is the last ABC to the downside of a lower degree and the Z wave from the higher degree count.
Then the upward move seen since June 10 is the first starting impulse that will lead the price above $0.41 and ultimately to a new ATH.
In a bearish scenario, the Z wave still hasn’t ended. The descending move from mid-April is only its first sub-wave A, which would make the increase seen since its second sub-wave B.
C sub-wave would be awaited to start and could potentially lead the price into the next significant horizontal zone to the downside at around $0.12 for the completion of the Z wave.
Zooming into the hourly chart and analyzing the price structure from June 10, we can say there is a higher possibility that the structure is bullish. The main differentiator between these two scenarios is the wave structure in these two waves.
If it’s an impulse wave, then it should have a five-wave structure, and if it’s a corrective wave B it took is sub-divided into a three-wave structure. And the decline in which the price is currently, if the count is bullish, should be a corrective one, and if the count is bearish should be impulsive.
The increase seen from June 10 and the decline from July 14 are more adequate for the bullish count. However, since we are in decline, we can evaluate these possibilities by where and how the current decline ends.
We are seeing a descending triangle from July 14, in which an ABCDE correction is made. If this is true, then a breakout to the upside would be expected momentarily as the price has approached the triangle apex and retraced by 0.5 from wave 1.
On the other hand, if the price continues to fall and breaks the triangle from the downside, going below the 0.618 Fibonacci retracement level, it would mean that it is headed for another lower low according to the bearish count.
Cardano has seen strong fundamentals shift in the past year with its ecosystem developments. The bull cycle for ADA was mostly driven by the anticipation of smart contracts and the first dApps. As the launch flopped while the price reached exuberant levels, investors’ interest and the price fell.
As we have seen some technological improvements and on-chain activity that support the adoption assumption, with the price of ADA being 94% from its ATH, investors might gain interest again.
According to the chart analysis, two scenarios are still in play, and we are yet to see which is the primary one, but as of now, the picture looks more bullish than bearish.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.