Cardano [ADA] is currently caught in a tug of war.
From a technical perspective, ADA posted three months of consecutive gains, pushing ADA close to the $0.30 level. However, the altcoin started October down over 3%.
Analysts are now flagging $0.24, which has become a key level for Cardano to watch out for the potential change in the token’s movement. The main question is whether the pullback is a short-term correction or the beginning of a more profound decline.
On a fundamental level, Cardano launched the second week of October with fireworks. As we can see from the chart below, Cardano just broke a five-year-old record.
In Epoch 660, 1,780,896 transactions were processed, compared to the previous record of 1,566,974 in November 2021. This means a new record, with an average of 83.83 transactions per block.
Normally, this sort of technical-fundamental divergence would indicate that ADA is undervalued, as increased activity suggests that fundamentals are improving despite its recent price weakness.
In addition to this, Chainspect added that Cardano posted over $100k in monthly revenue for the first time, reaching $136.6k over the last month.
This means that another chapter of Cardano’s expansion narrative is being added, signifying that even though ADA is facing pressure, the network’s activity keeps rising.
Naturally, the key question is whether these improving fundamentals can support Cardano’s valuation and eventually translate into strong price action.
Is ADA overvalued despite Cardano’s growing network activity?
Typically, signs of undervaluation tend to be among the first things that smart money looks at when assessing a market opportunity.
In other words, if Cardano’s transaction activity and network revenue continue to climb, while ADA faces short-term selling pressure, it could draw in investors that see a discrepancy between the asset’s current valuation and its fundamentals.
However, looking at the current scenario, this may not be true.
As the post below highlights, Cardano whales have been selling their coins. During the last five days, 110 million ADA were dumped by big holders in the market, putting extra selling pressure on the price as it nears the key support area.
The most worrying sign, however, is the decrease in network activity. The number of daily active addresses fell by 41.36% to 15,977, compared to 27,248 during the same time last week.
Together, these trends constitute a potentially overvalued scenario for Cardano.
While transaction activity hit a record high and network revenue is climbing, accumulation or increased engagement by users is not in sight.
This means that the market does not see ADA’s correction as an obvious buying opportunity at the moment, contrary to signs of undervaluation.
Instead, whale selling, a decrease in active addresses, and ongoing price weakness indicate that investors are cautious about ADA’s near-term prospects, potentially causing the $0.24 support level to break and exposing the altcoin to a deeper correction.
Final Summary
- Cardano hit a five-year transaction record, while monthly revenue rose to $136.6k.
Whales sold over 110 million ADA in five days, putting the $0.24 support level at risk.