Cardano On-chain Analysis: How High Can Cardano Go In February?

In Brief: 

• Cardano has surged 63% this year, outperforming all of the Top 5 Layer-1 Tokens. 
• DeFi TVL on Cardano has doubled since January 1.
• Cardano Whales are primed to HODL as derivatives traders also increase long positions. 

Cardano (ADA) is a proof-of-stake layer-1 network coveted for its scalability and low transaction fees. The native ADA token has delivered an impressive 63% performance YTD. Within the same period, its DeFi Total Value Locked surpassed $100 million, doubling the $49.85 million recorded on January 1. 

Quite expectedly, this strong January performance has attracted a lot of Whale attention. But how high can Cardano go in February? Exploring crucial on-chain data, here is an objective, in-depth analysis of how Cardano will likely perform this month. 

Financials: 

Cardano Strong DeFi TVL Performance Flashes Bullish Signal For ADA

Cardano’s financial performance metrics for last month were predominantly positive. Increased activity across various Cardano-native DeFi protocols has culminated in a 63% ADA price surge. 

Year to date, Cardano Total Value Locked has surged by 100%. The most significant surge in ADA prices occurred in the first week of February after Cardano TVL witnessed an uptick amid mildly-negative sentiment in the Ethereum community. 

Total Value locked measures the volume of cryptocurrency locked in a smart contract. An increase in TVL often leads to a boost in the price of the native Layer-1 token. 

Derivative Markets:

Cardano Derivative Markets Singal Massive Buy Pressure Amid Ethereum’s “Shanghai Upgrade” Uncertainty

Evidently, Cardano has benefited from the flat ETH sentiment, largely driven by investors front-running the “Shanghai upgrade.” Cardano Aggregate Open Interest across top exchanges rose from $160.98 million to a peak of $195.32 million between Jan 11 to Feb 2, 2023.  

Cardano Open Interest witnessed a spike around January 11, when the Ethereum developer community announced that the Shanghai upgrade, originally scheduled for September 2023, is now slated for March 2023. 

Open Interest uptick is a bearish signal indicating that an increased volume of derivatives contracts are being created as investors close out their existing positions.

Notably, According to data from Dune Analytics, almost $19 billion worth of ETH tokens is set to be un-staked. Hence, many investors have turned to the Cardano ecosystem for yield-farming opportunities in the ongoing bull run. The recent Cardano TVL & Open Interest growth is expected to translate into more gains for the native ADA token in the coming weeks. 

Network Activity:

Ethereum Net-Deflationary Supply Could halt Cardano Rally 

Cardano has been rising in 2023 partly because of the uncertainty surrounding the Ethereum ecosystem. As the “Shanghai upgrade,” which will finally enable Ethereum PoS validators to withdraw their funds, looms, investors are wary of a potential 16 million ETH dump. 

In reverse, Ethereum PoS is expected to compete fiercely with Cardano and other Layer-1 PoS networks. Hence, it is worth keeping an eye out for Ethereum’s recent net-deflationary supply trend thanks to the newly-enabled burn mechanism. 

According to on-chain data provided by Ultrasound Money, Ethereum closed January in a -0.13% net-deflationary position. If the heightened NFT activity on OpenSea is sustained, Ethereum could close out in a net-negative supply position for the second consecutive month. 

This may be enough to incentivize node validators to HOLD their newly unstaked ETH and likely lead to a gradual Cardano correction. 

Rounding Up:

How High Can Cardano Go In February?

To a large extent, how high Cardano performs in February will depend on investor outlook about the rival Ethereum proof of stake network and its DeFi TVL trend. 

In terms of potential short-term price movements, In/Out of Money Around Price (IOMAP) data provided by IntoTheBlock shows that Cardano has minimal wiggle room. ADA will likely have strong support at $0.3882, but it will face strong resistance in its march toward $0.4383. 

IOMAP helps investors to identify potential large buy or sell points by comparing the average purchase price of tokens held in specific wallets to the current market price.