Cardano’s native ADA token suffered a significant setback in June after the United States Securities and Exchange Commission (SEC) labeled it a security in its lawsuits against Binance and Coinbase. This triggered a sharp price drop of 42.5% to a two-year low of $0.21, which was further compounded by the removal of US-based trading apps Robinhood and eToro. However, beneath the surface, the Cardano network has progressed with increased decentralized finance (DeFi) activity following increased scalability. This article explores Cardano’s DeFi ecosystem and the potential for positive recovery despite challenges.
Cardano’s Rising DeFi Activity:
Despite criticism and delays in network updates, Cardano has seen increased activity since implementing the long-awaited scalability upgrade called Hydra, launched in May 2023. Total fees paid to the Cardano network reached a one-year high after the previous upgrade impacted by a lawsuit SEC. However, overall activity has remained on a consistent upward trend in recent weeks. The total ADA stored in Cardano’s DeFi applications has soared to double its peak value during the 2021 bull market, indicating a growing interest in the ecosystem. The trading volume on the Cardano decentralized exchange has also seen a significant increase since the Hydra upgrade.
Hydra Upgrade and Decentralization:
Hydra, a layer-2 scaling solution, has played a critical role in increasing the throughput and scalability of the Cardano blockchain. Transactions are processed on the sidechain, increasing overall network efficiency. Additionally, the Jarvis Labs report highlights Cardano’s high decentralization based on Nakamoto’s coefficients, indicating that the network is less susceptible to being controlled by multiple entities. This higher level of decentralization could positively impact Cardano’s classification as a security in the United States.
ADA Price Analysis and Recovery Potential:
On-chain analytics firm Santiment observed a high number of sells at a lower price in early July as the ADA recovered towards the $0.30 resistance level. Profit booking activity signals oversold conditions, potentially increasing the chances of a price bounce. Funding rate data for ADA perpetual swap contracts shows the majority of traders are holding short positions, betting on a dip due to regulatory concerns. Contrary price demonstrations may occur in the short to medium term as a result. Technically, the ADA/USD pair has made higher lows after bottoming around $0.21 in June, indicating buyer interest during the slide. Confirmation of the positive trend will be seen if the buyers manage to turn the horizontal resistance level at $0.30 into support. The ADA/BTC pair is also showing signs of potential downside, with its weekly relative strength index falling into oversold territory. If buyers manage to break through the 0.00000956 Bitcoin long-term support and resistance level, the pair could experience a 60% price spike towards the 0.00001548 BTC support.
ADA Cardano has faced challenges due to SEC lawsuits, delisting and negative sentiment. However, the network continues to progress, particularly within its DeFi ecosystem. With increased activity and potential technical improvements, ADA promises to have a positive recovery going forward. Despite the setbacks, Cardano remains resilient and aims to regain momentum, attracting decentralized finance investors and enthusiasts to its innovative blockchain platform.