Cardano (ADA) Price Analysis: Correction and then $1? -Key Insights

Key Insights:

• Cardano (ADA) price is down 16% since retesting $0.68 last week, the highest since the TerraUST crash nuked crypto prices back in May 2022.
• Despite the double-digit ADA price correction, new users continue to troop into the Cardano ecosystem, suggesting the rally may not be over yet.
• On-chain analysis of the historical buy/sell patterns of the current Cardano investors reveals potential support and resistance territories that could impact the ADA price action in the days ahead.

Cardano (ADA) price tumbled toward $0.57 on Monday morning, a 16% pull-back from the  20-month peak of $0.68 recorded on Dec 14. Despite the ongoing retracement, on-chain data shows that Cardano has not recorded a major deterioration in the fundamental growth metrics. 

Can the growing number of new entrants trooping into the Cardano ecosystem improve ADA’s price rebound prospects?

Cardano Continues to Attract High Volume of ‘New User’ Transactions

Cardano emerged the second-best performing Layer-1 altcoin last week, behind Avalanche (AVAX) ecosystem. The Cardano DeFi ecosystem witnessed a 185% spike to $444 million, driving ADA price to a 20-month peak of $0.68. The bears narrowly managed to avert a $0.70 retest and have imposed 16% retracement since then. 

However, the Cardano has not recorded major deterioration in its fundamental growth metrics. Firstly, the TVL continues to trend around $400 million range. But more importantly, on-chain data trends show that new users are still trooping in to Cardano ecosystem with fresh capital. 

According to IntoTheBlock, Cardano new adoption rate has trended above 30% for the better part of the past month, since hitting a 60-day peak of 38.50% on Nov 21 which had set off the initial price breakout

 As seen below, the Cardano New Adoption rate has not recorded a significant drop off despite the price correction this week. This signals that ADA is still currently attracting demand courtesy of usually high number new joiners. 

The New Adoption Rate metric measures the percentage of total active addresses that conducted their first transaction on a given day. This provides clear insights into the rate at which crypto investors are bringing new money into the ADA spot markets. 

When new user adoption increases during a price correction, it signals that the underlying token is still attracting high demand and could be primed up for an early rebound. 

ADA Price Forecast: Possible Rebound toward $1

From an on-chain perspective the influx of new capital from the new entrants puts ADA price is good stead for a possible rebound toward $1, once the current consolidation phase is over.

The In/Out of the Money Around Price (IOMAP) data, which groups the current ADA holders based on their historical entry prices, also affirms this optimistic outlook. It shows that the $0.74 area poses the largest resistance to Cardano’s price rebound mission to reclaim $1.

As seen below, 166,450 current holders had bought 1.41 billion ADA at a minimum price of $0.74. Hence, Cardano price could suffer another retracement if those holders look to take some profits, after over 1-year of holding at a loss.  

But if Cardano continues to attract fresh capital from new users, ADA price will likely smash that resistance has reclaim $1 as predicted.

On the downside, the bears could invalidate that positive prediction if ADA price dips below the critical psychological resistance at $0.50. But, in that case, the 481,980 million holders that bought 3.17 billion ADA at the maximum  price of $0.56 could offer significant support. 

Since the overall market sentiment surrounding Layer-1 altcoins is still largely bullish, Cardano price will likely avoid that bearish scenario in the short-term.