Cardano [ADA] holders will not gain without short-term pain, here’s why

According to a Santiment report, small to medium-sized investors who own between 10,000 and 1,000,000 Cardano [ADA] coins are hesitant to buy more of the cryptocurrency. The price of ADA has been steadily declining in recent months, which could explain why holdings have been reduced.

This cohort of ADA holders increased their holdings during the 2019 bear market, according to the on-chain analytics platform. However, when the ADA’s price reached $1.3 in the final stages of the 2021 bull market, these holders experienced the same outcome.

Following this, these investors began distributing more ADA tokens than they had purchased up until two months ago. This was when ADA was trading for as little as $0.33.

According to Santiment’s analyst,

“This suggests that these investors may be cautious about the potential of ADA.”

A closer look at ADA’s supply distribution revealed that stakeholders with 1,000,000 – 100,000,000 ADA tokens have increasingly dumped their bags in recent months.

According to Santiment data, the number of these addresses peaked at 2915 in June 2022. As the price of ADA fell throughout the year, these investors sold off their holdings to protect themselves from further losses.

This cohort had 2819 addresses at the time of publication, a 3% decrease since then.

There is a strong correlation between increased whale accumulation and asset price. A decrease in the former frequently results in a decrease in the latter. This, combined with the general cryptocurrency market’s severe decline last year, left ADA with no chance of recovery.

Since April 2022, ADA’s Network Realized Profit and Loss ratio has returned mostly negative values, according to on-chain data. This meant that all investors who sold their ADA coins – small, medium, and whales – have since lost money on their investments. ADA’s NPL was spotted at -7.63 million at press time, with many still logging losses.

Likewise, ADA’s Market Value to Realized Value (MVRV) ratio has been negative since April 2022.

A negative MVRV ratio indicates that the cryptocurrency’s market value is less than its realized value. This is an indication of potential overvaluation because it indicates that the market is currently valuing the cryptocurrency at a lower price than it has historically.

As of this writing, ADA’s MVRV was -66.30%, indicating that most investors would lose money if they sold all of their holdings at the current price.