Why Cardano’s ADA Price is Falling: Key Factors Behind the Downtrend

Cardano's ADA token has been in a downward spiral recently, continuing its price drop on March 31 with a 4.5% decrease in the last 24 hours, now trading at $0.6529. This marks a significant 10% decline over the past week and a staggering 45% loss since its peak of $1.19 on March 2, 2025. Several factors are contributing to this bearish trend, including weakening network activity, a decline in total value locked (TVL), and negative sentiment in the derivatives market.

1. Diminishing Network Activity and TVL Decline

A major contributor to Cardano's underperformance is the decreasing network activity and a sharp decline in its total value locked (TVL). Cardano’s daily active addresses fell by more than 70%, dropping from 70,700 on March 2 to under 20,000 by March 31. The number of daily transactions also saw a decline of over 71% during the same period. Alongside these drops in user activity, Cardano’s TVL plummeted from $529.8 million on March 3 to just $317.9 million by March 31. This reduction in both user engagement and TVL is a strong indication of reduced investor confidence and market participation.

2. Bearish Sentiment in the Derivatives Market

Another significant issue for Cardano is the lack of enthusiasm in its derivatives market, which is reflected in the low open interest and negative funding rates in ADA futures. Funding rates for ADA have remained consistently below zero for the past month, which indicates that short positions dominate the market. In a negative funding rate environment, those holding short positions are effectively paying others to maintain their bearish bets. This shows that there is a high concentration of traders betting on ADA’s decline, further suppressing upward momentum.

Moreover, cumulative open interest in ADA futures has stayed under $1.0 billion since March 4, well below the $1.50 billion peak reached on January 18. This lower open interest suggests a lack of capital and trader enthusiasm to push the price higher, making ADA vulnerable to further losses if selling pressure mounts.

3. Weakening Technical Indicators

From a technical perspective, ADA has been struggling with stiff resistance levels that have hindered any meaningful price recovery. Between March 9 and March 27, ADA was trapped between the 50-day and 200-day simple moving averages (SMA), with all attempts to break above the 50-day SMA at $0.7531 being rejected. This resistance zone acted as a significant barrier, adding to the selling pressure every time the price approached it.

On March 28, ADA fell below the 200-day SMA at $0.7262, flipping this level from support to resistance. The price drop below this crucial moving average further emphasized the bearish trend. As a result, the next support level to watch is around the $0.60 psychological mark, followed by stronger support between $0.5794 (the low reached on February 28) and $0.5197 (the November 13, 2024, low).

4. Risks and Outlook

With the combination of decreasing network activity, negative funding rates, and weak technical indicators, ADA faces a continued risk of further declines. The absence of renewed interest from institutional or retail traders could lead to more selling pressure, potentially triggering a cascade of liquidations, especially if leveraged positions are unwound.

The outlook for Cardano’s ADA price largely depends on how quickly the network can revive user engagement and how the market sentiment around Cardano evolves. Until then, ADA may continue to struggle at its current levels, with more downside potential if these bearish trends persist.

To stay updated on ADA’s price movement, be sure to follow trusted cryptocurrency platforms for the latest insights.