Cardano Price Forecast: Bearish breakout warns of a 15% downside risk

• Cardano hovers below $0.20 on Wednesday after facing a 6% loss the previous day.
• On-chain data shows declining network activity and REV, indicating reduced demand in the Cardano ecosystem.
• Cardano futures point to a sell-side bias amid declining Open Interest and elevated long liquidations over the past 24 hours.

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand. Cardano futures data indicates fading retail speculation with declining Open Interest and over $2 million in long liquidations in the last 24 hours. 

Fading ecosystem activity and mixed retail demand

Blockworks data shows that the Cardano ecosystem is experiencing a decline in transaction count, resulting in lower revenue collection. The transaction count is down to 18,334 on Monday, from 40,063 on August 21, while its REV, which tracks the total transaction fees and paid failure collateral, dropped to $1,167 on Monday, from $2,796 on August 22. 

This decline in on-chain activity suggests that Cardano is struggling to gain market share among layer-1 blockchains. Moreover, the reduced activity translates to lower intrinsic demand for the ADA token.

On the derivatives side, metrics show sell-side dominance. CoinGlass data shows that ADA futures Open Interest (OI) is down over 4% in the last 24 hours to $409.84 million, suggesting a positional wipeout or a reduction in the notional value of active contracts. The $2.77 million in long liquidations over the last 24 hours, out of a total of $2.90 million in liquidations, reaffirms the wipeout of bullish positions.

However, the ADA OI-weighted funding rate remains positive, at 0.0030%, down from 0.0051% the previous day, suggesting that traders are shifting away from long-side positional buildup.

Technical outlook: Cardano’s downside breakout eyes $0.16

Cardano trades around $0.1900 on Wednesday, keeping a bearish near-term tone after a 6% drop the previous day. This pullback broke below the 50-day and 100-day Exponential Moving Averages (EMAs) at $0.1994 and $0.2002, respectively, while the 200-day EMA looms much higher near $0.2442.

In addition, Cardano slips below the 50% retracement level of the downswing from $0.2887 to $0.1385, at $0.1999, reaffirming the bearish bias. The next support band for ADA emerges at the 23.6% Fibonacci retracement level of $0.1647, indicating a 15% downside risk from the current market price.

The Relative Strength Index (RSI) hovers around 44, hinting at subdued buying interest, and the Moving Average Convergence Divergence (MACD) and signal line extend a declining trend, with an expanding bearish profile, together reinforcing the view of firm downside momentum.

On the topside, initial resistance is defined by the 50-day EMA at $0.1994, followed closely by the 100-day EMA at $0.2002, with an additional hurdle at the 50% retracement level around $0.1999. Any sustained recovery toward the 200-day EMA at $0.2442 would first need to overcome these layers of supply.

(The technical analysis of this story was written with the help of an AI tool. Know more.)