Home Altcoins News Cardano’s Resilience Shines Amid Regulatory Challenges, Uptick in DeFi Activity Signals Potential Recovery

Cardano’s Resilience Shines Amid Regulatory Challenges, Uptick in DeFi Activity Signals Potential Recovery

Cardano (ADA), the native token of the Cardano blockchain, has faced recent challenges, including the SEC lawsuit and delistings from major trading platforms. However, beneath the surface, the network has been making significant strides in its decentralized finance (DeFi) ecosystem, indicating the potential for a positive recovery. This article explores Cardano’s journey through the SEC lawsuit and delistings, highlights its progress in the DeFi space, and analyzes the potential for a rebound based on on-chain indicators and technical improvements.

The SEC Lawsuit and Delistings:

In early June, the SEC’s classification of ADA as a security in its lawsuit against Binance and Coinbase had a substantial negative impact on ADA’s price. The token experienced a sharp 42.5% decline, dropping to a two-year low at $0.21. Furthermore, the delisting of ADA from popular U.S.-based trading apps, such as Robinhood and eToro, intensified the downside selling pressure. These developments created a challenging environment for ADA in the short term.

Cardano’s Uptick in DeFi Activity:

Despite the setbacks, Cardano has been making notable progress in its DeFi ecosystem. The long-awaited scalability upgrade known as Hydra, launched in May 2023, has contributed to increased activity on the network. Before the SEC lawsuit, the total fees paid on Cardano reached a one-year high, indicating growing user engagement. Although the lawsuit temporarily dampened this momentum, recent weeks have shown a consistent uptrend in activity.

Data from DeFiLlama reveals a significant rise in the total ADA deposited in Cardano’s DeFi applications, surpassing the peak value during the 2021 bull market. Additionally, trading volumes on Cardano’s decentralized exchanges (DEXs) have experienced a substantial increase since the Hydra upgrade.

Hydra: A Scalability Solution:

Hydra, a layer-2 scaling solution implemented on Cardano, aims to enhance the blockchain’s throughput and scalability. By processing transactions on a sidechain, Hydra enables faster and more efficient transactions, supporting the network’s growth and usability. The successful implementation of Hydra enhances Cardano’s potential for scalability and positions it favorably within the DeFi landscape.

Decentralization and Security:

A report from Jarvis Labs highlights Cardano’s decentralization based on the Nakamoto coefficient, a measure of the minimum number of entities controlling a significant portion of a network’s staked coins. Cardano’s higher degree of decentralization compared to other networks may have positive implications for regulatory concerns, potentially mitigating the classification of ADA as a security in the U.S. This robust decentralization further strengthens Cardano’s value proposition and contributes to its long-term sustainability.

Positive Price Analysis:

On-chain analytics firm Santiment observes a high amount of sales at lower prices in early July, leading to oversold conditions. This situation increases the likelihood of price bounces and suggests a potential reversal in sentiment. Additionally, funding rate data for ADA perpetual swap contracts indicates that most traders have held short positions, setting the stage for a potential contrarian price rally in the short to medium term.

From a technical perspective, the ADA/USD pair has formed higher lows after bottoming at around $0.21 in June, indicating buying interest during price dips. Confirmation of a positive trend would occur if buyers manage to flip the horizontal resistance level at $0.30 into support, potentially triggering further upward movement.

In the ADA/BTC pair, the weekly Relative Strength Index (RSI) indicator falls into the oversold category, suggesting that the pair is undervalued. Additionally, the pair is testing a long-term support and resistance level of 0.00000956 BTC. If buyers succeed in defending this level, the pair could experience a 60% price surge towards the 0.00001548 BTC support.

Looking Ahead:

Despite the challenges posed by the SEC lawsuit and delistings, Cardano’s growing DeFi ecosystem, positive on-chain indicators, and technical improvements offer hope for a potential recovery. The progress made in scalability with the Hydra upgrade, combined with Cardano’s decentralized nature and security, positions the network for continued growth. As Cardano continues to demonstrate resilience and make strides in its development, market participants eagerly anticipate future developments that could shape the trajectory of ADA.

Read more about:
Share on

Julie J

Julie is a renowned crypto journalist with a passion for uncovering the latest trends in blockchain and cryptocurrency. With over a decade of experience, she has become a trusted voice in the industry, providing insightful analysis and in-depth reporting on groundbreaking developments. Julie's work has been featured in leading publications, solidifying her reputation as a leading expert in the field.

Crypto newsletter

Get the latest Crypto & Blockchain News in your inbox.

By clicking Subscribe, you agree to our Privacy Policy.

Get the latest updates from our Telegram channel.

Telegram Icon Join Now ×