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Cardano Encounters Regulatory Roadblocks
The digital asset of the Cardano network, ADA, suffered a substantial hit when the SEC labeled it as security during their proceedings against Binance and Coinbase in early June. This situation catalyzed a significant price plummet of 42.5%, from $0.37 to a two-year low of $0.21, in a matter of days. Consequently, ADA faced additional selling pressure and was delisted from US trading platforms, including Robinhood and eToro.
Growing DeFi Activity Within the Cardano Ecosystem
Despite enduring regulatory scrutiny and delays in development, Cardano has experienced a noteworthy surge in decentralized finance (DeFi) activities following a scalability upgrade in May 2023. Charles Hoskinson, the founder of Cardano acknowledged that while there may have been some missteps in technological choices and ambitious timelines, about 85% of the initial roadmap has been accomplished.
In the period following the implementation of the scalability upgrade, Hydra, the network saw an unprecedented increase in usage. Data from DefiLlama indicates that the total ADA deposited in DeFi applications on Cardano has made impressive strides, even surpassing its height during the 2021 bull market. Similarly, the number of transactions on decentralized Cardano exchanges rose significantly post-Hydra.
Increasing Decentralization and Potential Price Upswing
A recent report from Jarvis Labs highlights ADA as one of the most decentralized assets based on its high Nakamoto Coefficient, a measure of the fewest number of entities in control of a third of all staked coins in a network. This information could be crucial in determining whether ADA is considered a security in the US. Furthermore, an analysis by the same firm suggested an optimistic outlook of ADA's price, forecasting a comeback in the next bull run.
ADA's Market Sentiment and Technical Indicators
Santiment, an on-chain analytics firm, recorded significant selling at bottom prices in the first week of July, indicating oversold conditions that typically precede price bounces. CoinGlass data reveals that an overwhelming number of traders are initiating short positions on ADA, betting on further price drops following the regulatory pressure. Such pessimistic market sentiment could lead to a contrarian rally in the mid to short term.
From a technical perspective, multiple signs point towards potential price recovery. The ADA/USD and ADA/BTC pairs display patterns that suggest investor interest in purchasing ADA at lower prices. If the price manages to overcome critical resistance levels, ADA could be positioned for a significant rally.
Despite the headwinds ADA has been facing, under the surface, the Cardano network seems to be strengthening. Continued technical development and positive on-chain growth could potentially usher in a period of recovery for ADA.
