Cardano (ADA) Set for 7th Consecutive Monthly Red Candle, Is a Bounce Due?

Since September 2021, ADA has posted lower monthly lows against the dollar, and March is on track to do the same. This has turned out to be a frustrating period for Cardano holders.

Support exists around the $0.75 level. However, the current price is dangerously close to this point. And with the RSI showing a steady downward sweep during this time frame, there is a very good chance that the support will be broken.

Source: ADAUSDT on TradingView.com

Cardano founder says price doesn’t matter

Since posting its $3.12 ATH, just before Alonzo’s smart contract launch, ADA has closed every subsequent month since September 2021 lower than the previous one.

Expectations were that Alonzo would bring in a flood of new users, causing an increase in demand for ADA, driving the price up in the process. But this scenario has not materialized, with dApps rolling out at a painfully slow pace.

DeFi Llama shows only six DeFi projects listed on the Cardano chain, and only four are active. These are SundaeSwap, Minswap, MuesliSwap and ADAX Pro, with SundaeSwap having a 72% dominance.

Input Output CEO Charles Hoskinson frequently dismisses the importance of price. During an AMA last year, Hoskinson said he couldn’t care less about the price. Instead, his focus and priorities are on development.

Still, investors as a whole continue to view price as a measure of performance. And in this sense, Cardano has been lacking.

Are Initial Participation Group Offerings (ISPOs) Guilty?

The reason for the poor price performance is puzzling, but it may have to do with ISPOs.

ISPOs are a fundraising mechanism that allows delegators to divert ADA staking rewards to a project that is built on Cardano. In return, the delegator will receive that project’s tokens as a reward, and the project has a pool of funds to pay for startup costs.

One Reddit user points out that the ISPO mechanism inadvertently increases selling pressure, as new projects sell ADA to finance their operations. With that, depressed price action should be expected.

“So we went from being an ecosystem where everyone was staking and hodling, to an ecosystem trying to launch 60+ DeFi projects, all with these same fundraising models; most of the projects on Cardano are not taking as much traditional venture capital money, but rather taking advantage of these fundraising mechanisms.”

If true, the current downtrend could be considered a teething period, from which Cardano will emerge once new projects are up and running.

At the same time, breaking the downtrend depends on Bitcoin. On-chain BTC analysis by Kraken shows that confidence is low and we may already be in a bear market.

Either way, the development of Cardano, especially in Africa, and the new roadmap for 2025, shows that Input Output intends to go ahead regardless.