The cryptocurrency market is in a correctional phase, with over $500 million liquidations made in the last 24 hours. The total value of the industry has now fallen below $3.4 trillion, almost reversing all the early gains of the year. Among the hardest-hit assets is Cardano (ADA), which has continued its downward trajectory, showing signs of weakness amidst a broader market pullback.

At press time, ADA is down 8% over the last 24 hours, trading at $0.89. This marks a continued decline in the cryptocurrency’s price, which has been trending lower in recent days. 

Cardano has been facing stiff resistance in its efforts to break through key price levels, and a weakening technical structure is contributing to growing bearish sentiment.

User activity, TVL drop on Cardano network

According to data from Artemis, Cardano’s user activity has sharply declined since early December. Daily active addresses on the Cardano blockchain have plummeted from 96,700 on December 3 to approximately 38,200 on January 9. Similarly, daily transactions have fallen from 144,300 to just 54,600 in the same period.

The decline in user engagement is a worrying trend for Cardano, as it has historically been a key indicator of network health and potential growth. The falling activity could exacerbate ADA’s price weakness, further fueling the downturn.

In addition to waning user engagement, the total value locked (TVL) on Cardano has also taken a hit. Data from DefiLlama shows a steep decline of over 31.5% in the TVL since early December, dropping from $708.9 million on December 3 to around $485 million at the time of publication. 

Between January 7 and January 9 alone, TVL experienced a sharp $105 million decline, representing an 18% decrease in less than 72 hours. 

Correlation with Bitcoin’s market movements

Cardano’s price movement has largely mirrored that of Bitcoin (BTC) in recent months, with both assets consolidating around key support levels. However, if Bitcoin continues its correction in the coming weeks, ADA is expected to perform even worse, given its already weak technical indicators.

Reports have emerged suggesting that the U.S. government is preparing to liquidate approximately 69,370 BTC seized from the Silk Road, adding to the market’s uncertainty. 

The US Govt has been given the greenlight to liquidate 69,000 BTC ($6.5B) from Silk Road, an official confirmed to DB News today

Interesting situation less than 2 weeks away from the new admin who vowed to not sell https://t.co/HqD1KnhJK3 pic.twitter.com/xn8ATSEL7H

— db (@tier10k) January 9, 2025

The political theatre between the outgoing and incoming US administrations, with President-elect Donald Trump vowing not to sell any Bitcoin held by authorities, adds complexity to the situation.

On the ADA/USDT chart, the price has faced resistance around the $1.3 level and has recently started to slide towards the $0.75 support level. Analysts predict that if this level is breached, further declines toward the 200-day moving average around the $0.55 mark could be in play.

The ADA/BTC pair shows a similar trend, with the price consolidating for several months. If the 900 SAT support level breaks down, ADA could slide further toward the 200-day moving average around the 700 SAT mark or even lower. 

The indicators suggest that ADA may enter a prolonged downward phase if the overall crypto market sentiment remains negative.

Analysts warn ADA could fall further

Technical analysts are growing increasingly bearish on ADA’s near-term outlook. A pseudonymous analyst, Kwantxbt, warned in a January 9 post that ADA is showing significant weakness at the $0.92 level. 

The analyst advised traders to wait for confirmation of support around the $0.85 mark before considering any long positions. If ADA loses this support, it could plummet to the 200-week simple moving average (SMA) around $0.763, with the psychological $0.60 level being a potential target if the decline continues.

ADA’s daily relative strength index (RSI) has also dropped from 63 to 44 in just three days, indicating increasing selling pressure, which could translate to a further price downtick for the asset.

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