Cardano’s native token, ADA, experienced a significant setback in early June when the United States Securities and Exchange Commission (SEC) categorized it as a security in lawsuits against major exchanges like Binance and Coinbase.
This declaration led to a sharp 42.5% drop in ADA’s price, pushing it to a two-year low of $0.21. Delisting on U.S.-based trading apps added to the downward pressure.
However, despite these challenges, Cardano’s network has been making progress with increased decentralized finance (DeFi) activity and positive technical indicators, pointing towards a potential recovery.
Despite facing criticism for delays and updates, Cardano has shown improvement in its network activity, particularly after implementing the scalability upgrade called Hydra in May 2023.
Total fees paid on Cardano reached a one-year high after the upgrade, followed by a decline during the SEC lawsuit. However, activity has been steadily increasing over the past few weeks.
The total amount of ADA deposited in DeFi applications on Cardano has surpassed its peak during the 2021 bull market. Trading volumes on Cardano decentralized exchanges have also seen a significant uptick since the Hydra upgrade.
Jarvis Labs conducted a report that revealed ADA as one of the most decentralized Layer-1 blockchains based on the Nakamoto coefficient.
This measure determines the minimum number of entities controlling 33.33% of all staked coins in the network. Higher decentralization works in Cardano’s favor when determining its regulatory classification as a security in the United States.
Santiment, an on-chain analytics firm, recorded a high number of sales at lower prices in early July as ADA rebounded towards the $0.30 resistance level.
This oversold condition suggests a higher chance of a bounce and potential price rally. Additionally, funding rate data from CoinGlass indicates that most traders held short positions on ADA, expecting a downturn after the regulatory crackdown.
This sentiment, combined with massive sell-offs, could create a contrarian price rally in the short to medium term.
The ADA/USD pair has formed higher lows after hitting a bottom around $0.21 in June, indicating that buyers are actively acquiring the token during dips.
Confirmation of a positive trend would occur if buyers successfully flip the horizontal resistance level at $0.30 into support.
