Cardano's NVT Ratio Peaks: Will ADA's Price Decline? – CryptoMode

Cardano (ADA) has seen its Network Value to Transactions (NVT) ratio surge to levels unseen since June.

This surge has raised concerns about the coin’s on-chain activities amid its recent price growth. According to IntoTheBlock, ADA noted a spike in its NVT ratio on Oct. 29, the highest in four months.

This increase suggests the coin’s market valuation may be outpacing its on-chain activity.

Cardano's NVT ratio has surged to its highest level since June, indicating a decrease in on-chain activity relative to price growth.

This classic overvaluation signal is notable given $ADA's recent underperformance, suggesting the potential for further downside.

Historically,… pic.twitter.com/yTx83exBXM

— IntoTheBlock (@intotheblock) October 29, 2024

Cardano’s high NVT Ratio and Trading Volume

Typically, a high NVT ratio signals overvaluation, which often precedes price declines if not matched by increased on-chain engagement. This metric points to an imbalance between ADA’s price movement and its on-chain utility, especially as the cryptocurrency has underperformed in recent weeks.

At the time of writing, ADA is trading at $0.3463, with a 2.3% gain in the past 24 hours. However, it has remained down by 12.8% over the past month.

This weak performance aligns with the trading volume trends, suggesting declining interest among traders. Artemis Terminal data showed that ADA’s daily trading volume fell to $197 million by Sunday from $545 million on Friday, its lowest since the beginning of October.

This downtrend in volume reflects waning interest and liquidity, which could exacerbate ADA’s price challenges if demand does not return.

Cardano Price Action

Meanwhile, Cardano’s price has been facing resistance at a previously broken ascending trendline. After dropping below this trendline last Friday, ADA has struggled to reclaim it, experiencing rejection at the $0.346 level.

If ADA continues to face resistance at this price point, it may head toward a retest of its September low at $0.303. Furthermore, IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model reveals a crucial resistance zone between $0.336 and $0.341.

In this range, approximately 119,360 addresses accumulated around 2.27 billion ADA. If the digital asset’s price trades around this range and holders their exit positions, they would do so at a breakeven level and intensify sell pressure.

Cardano’s In/Out of the Money. | Source: IntoTheBlock

A Start of the Alt Season?

Meanwhile, analysts suggest that a daily close above the $0.367 price level could invalidate the current bearish outlook. More importantly, it could drive Cardano’s native token to test its late-September high of $0.415.

Recall that IntoTheBlock data highlighted a sharp rise in ADA daily active addresses (DAA) holding losses. Nevertheless, a strong BTC price rally could result in a bullish broader crypto market, which should positively impact ADA and other cryptocurrencies’ prices.

It could also be the start of the much-anticipated altseason, which will see Cardano riding the wave as it did in Q1 2024 when it reached its yearly high of $0.7.