Where will ADA go if the network grows but the price is dire?

After ADA was the third-placed cryptocurrency by capitalization, ADA has given HODLer and the market hope to hit $ 5 by the end of 2022, while the $ 5 target in December seems perfectly feasible.

However, at the time of writing, the altcoin is nearly 60% below this ATH.

ADA 4-Hour Price Chart | Source: Tradingview

Where is the price moving?

Just before Cardano launched its first decentralized exchange, SundaeSwap, social volume hit an all-time high. In fact, on December 6, the day after ADA fell more than 10% due to a massive market sell-off, the network hit an “incredible milestone” when the number of ADA staking wallets topped 1 million. In fact, it saw nearly 1000% growth in less than a month.

Conversely, ADA is trading near the lower long-term support at $ 1.25 and the larger price trend is extremely bearish. While celebrity upgrades as well as launch events that resulted in high social volume have often raised ADA’s price in the past, this is not the case.

What’s different this time?

Despite expectations and the very positive social sentiment, ADA price is hovering around $ 1.44 at press time, down 10% last week and 30% over the month.

In fact, the short and medium term ROI of this altcoin is negative. Specifically, the 3-month ROI of ADA against the USD is -49.73%. One of the reasons for this 3 month price drop could be the low positive correlation of ADA with Bitcoin.

The source: IntoTheBlock

Looking at the graph above, ADA rallies often correlate with Bitcoin on a positive high. When ADA hit ATH in September, the correlation with BTC was around 0.9. Since then, however, the indicator has fallen, falling to a low on November 4th.

Although the correlation soon improved, the price has not yet found bullish momentum. However, since ADA is testing the lower support, a rebound from here along with a high correlation could boost the asset.

In particular, the number of active and new addresses reached an all-time low, which indicates a weakening of participation and activity in the network. However, these levels still hold up above levels for most of the year – a good sign.

Source: IntoTheBlock

At the time of the analysis, both a high and a low trading volume for the sixth-placed coin is a sign of a lack of interest from private and institutional investors.

It should be noted here that retail volume dominates the ADA ownership pool stats, and since this metric has been toned down, ADA’s problems may be due in part to it.

Source: IntoTheBlock

The boost from the retail side could be the main driver of the uptrend in the short term. Since ADA is testing vital long-term support, a rally from $ 1.25 would be a good short-term buy signal.

With ADA indicators appearing to be overheating at the time of writing, a short-term rally is to be expected.

Conversely, a drop in ADA below $ 1.25 will result in further losses and $ 1 is likely to be the next support.

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