Cardano (ADA) signals bearish: Whale shrinks position, on-chain volume plummets

Cardano (ADA) continues to plummet with a fall of nearly 2% at the time of writing on Wednesday, marking the third consecutive week in the red. The technical outlook leans heavily towards a downtrend, as ADA moves within a descending parallel channel – a signal that selling pressure is prevailing. This movement also coincides with on-chain data, indicating that the network is stagnating and the amount of ADA held by large wallets is showing signs of decline.

Network activity falls after massive profit-taking

Cardano's on-chain data shows that network activity is showing signs of decline following a strong profit-taking event on July 25. According to the analysis platform Santiment, the Realized Profit/Loss on Network (Network Realized Profit/Loss) has unexpectedly surged to 143.63 million ADA – reflecting a decisive wave of profit-taking from investors.

Since that time, trading volume on the network has plummeted, dropping to about 744 million USD on Tuesday, a sharp decline from the peak of 1.69 billion USD on July 25. As trading volume is often a comprehensive measure of on-chain activity, this decrease indicates that the Cardano network is entering a stagnation phase.

On-chain data of Cardano | Source: SantimentDespite this, there is still a notable positive signal: the group of users who had been "silent" is gradually returning. The number of active addresses per day has increased to nearly 31,000, surpassing the threshold of 28,248 addresses recorded during the recent profit-taking peak.

Cardano whales increase selling pressure

Since the recent profit-taking, ADA whales have been continuously reducing their positions. Specifically, the wallet group holding between 1 million and 100 million ADA has cut their holdings from 18.9 billion ADA ( as of 24th of the 7) down to 18.51 billion ADA — equivalent to a net sell of 390 million ADA, thereby contributing to increased selling pressure in the market.

ADA Supply Distribution | Source: SantimentOn the contrary, the group of "whales" holding over 100 million ADA has actively bought an additional 450 million ADA, raising their total holdings to 5.36 billion ADA. However, the discrepancy in scale between these two large wallet groups indicates that the selling pressure still mainly comes from the group holding between 1 million and 100 million ADA – and this is a concerning factor for the current price trend.

Cardano faces the risk of falling deep in the descending channel model

On the 4-hour timeframe, ADA has reversed to fall after hitting the resistance line of the descending parallel channel pattern. This marks the second consecutive decline, amid the 50-period EMA continuing to decline and approaching the 200-period EMA - increasing the risk of forming a death cross (. For investors who are on the sidelines, this could be seen as a sell signal, as the short-term downtrend begins to weaken the long-term uptrend.

Selling pressure is currently pushing the price of ADA towards the support area of $0.6884 – a zone that was last tested during Sunday’s trading session. This raises concerns about the possibility of prices continuing to weaken in the near future.

![])https://img-cdn.gateio.im/webp-social/moments-58300bceba0d3083f09024ca336ef98f.webp(The ADA/USDT chart on the 4-hour timeframe | Source: TradingViewThe Relative Strength Index )RSI( on the 4-hour chart is at 40, indicating that buying strength is weakening and there is still room to fall deeper before entering the oversold zone. At the same time, the MACD line has also crossed below the signal line, reflecting a negative shift in price momentum.

On the flip side, to regain upward momentum, ADA needs to break through the 200-period EMA at the price level of $0.7417 – coinciding with the upper resistance line – in order to confirm the ability to break out above the current down-channel pattern.

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