- Cardano price has plunged in the past few months.
- There are fears of contagion after the FTX collapse.
Cardano price dropped for three straight days amid rising risks of contagion in the cryptocurrency industry. ADA plunged to a low of $0.3438, which was the lowest level since October 23rd. It has crashed by more than 88% from its highest point in 2021, giving it a market cap of $12 billion.
Contagion risks remain
Contagion is a situation where a bad situation in an asset or a company spreads to other assets. The best example of this is the collapse of Lehman Brothers during the Global Financial Crisis (GFC). Its collapse led to a major bailout of top American banks like Goldman Sachs, Bank of America, and Citigroup.
The cryptocurrency industry has had several contagious events in the past few months. The most memorable was the collapse of Terra and its ecosystem. In its aftermath, this collapse led to other events like the bankruptcy of Celsius Network, Voyager Digital, and BlockFi.
A bigger contagion risk in the cryptocurrency industry is going on as FTX continues to struggle. On Tuesday, the company said that it had agreed to be acquired by Binance, a major rival. This happened as the amount of outflows from its ecosystem rose to over $6 billion.
Learn more about how to buy Cardano.
Cardano price is therefore crashing amid rising risks of contagion in the industry. The same is true with all other cryptocurrencies, which have plunged this week. In total, the market cap of all cryptocurrencies has fallen to below $900 billion.
ADA price also declined as these contagion risks moved to its ecosystem. According to DeFi Llama, the total value locked (TVL) in its ecosystem has dropped to about $70 million. Most importantly, the volume of Cardano’s NFTs traded has been in a strong downward trend. On Tuesday, only NFTs worth A$826k were traded as you can see below.
Cardano price forecast
The daily chart shows that the ADA price has been in a strong sell-off in the past few days. It has managed to move from this week’s high of $0.4375 to about $0.3463. The coin has crashed below all moving averages while the Stochastic Oscillator is moving toward the oversold level.
Cardano has also moved below the lower side of the descending triangle pattern. Therefore, the coin will likely continue falling as sellers target the key support level at $0.30. A move above the resistance at $0.39 will invalidate the bearish view.
