Cardano (ADA) has been underperforming the broader cryptocurrency market this week, trading sideways while other major assets like Solana (SOL) and Avalanche (AVAX) have registered double-digit price gains. This lackluster performance can be attributed to several bearish catalysts highlighted by on-chain data trends.
One significant bearish signal is the decline in Cardano’s decentralized finance (DeFi) activity. According to data from DefiLlama, Cardano’s total value locked (TVL) has dwindled from $520 million on March 14 to $409.9 million at press time on March 22, representing a $110 million decline over the past week. This substantial drop in DeFi participation on Cardano’s Layer-1 blockchain network suggests a bearish outlook for the native token, ADA, as it signals a downtrend in demand for DeFi services hosted on the network.
Adding to the bearish sentiment is the decline in Cardano’s open interest in the derivatives markets. Data from Santiment shows that ADA’s open interest has dropped by $500 million over the past month, from $1.5 billion on February 19 to $1.1 billion at press time on March 22. This significant capital outflow by traders is typically seen as a bearish signal, as falling open interest amid a price consolidation phase often indicates that traders are bracing for a more bearish outlook.
With low DeFi demand and existing market participants rapidly making $500 million capital outflows in the past month, Cardano’s price appears poised for a significant downswing. The ADA price is currently hanging precariously above $0.61, down 13% weekly, and if traders continue to close out positions, prices are likely to break below the psychological support of $0.60 and tumble towards $0.55 in the coming weeks.
