The Cardano (ADA) price attempted to reach $0.40 once again on Tuesday but saw it rejected. On-chain analysis explores how the recent shift in Cardano staking dynamics could accelerate the ADA price rally.
ADA price looks set to break above the $0.40 area as the November altcoin market rally intensifies. Recent on-chain data readings show that rewards accruing to Cardano network participants are rising.
Cardano Staking Valuation Has Hit Historic Peak
Bullish Cardano network participants have seized control of the market this week following positive changes in staking dynamics. First, Cardano witnessed a significant spike in staking in October. As depicted in the chart below, total ADA coins staked hit a 90-day peak of 23.05 billion on October 23. With ADA trading around $0.27, the total staking valuation stood at $6.2 billion at the time.
At press time, a total of 22.94 billion ADA coins are staked across various staking protocols, according to StakingRewards.com, a staking data aggregator platform. Valued at the current prices, the total ADA staked in smart contracts is now worth $8.9 billion, about 65.02% of total coins in circulation.
The staking metric tracks real-time changes in the number of coins currently deposited in smart contracts. Increased staking activity tends to impact prices positively for two major reasons.
Firstly, it reflects a growing commitment and confidence among token holders in the network’s stability and potential, encouraging more participants to lock up their tokens. This reduction in circulating supply can create a supply-demand imbalance, putting upward pressure on prices.
Evidently, the chart above affirms this thesis. It shows that the 15% increase in Cardano staking between September 28 and November 21 has been accompanied by a 40% ADA price rally.
Secondly, this higher staking participation signals increased network security and decentralization, fostering a positive sentiment within the community. This could attract further interest from prospective investors in the coming weeks.
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Staking Rewards Rate Have Now Exceeded Inflation Rate
In further confirmation of the bullish outlook, Cardano looks set to attract higher staking activity in the weeks ahead. Notably, on-chain data shows that Cardano has witnessed a considerable increase in rewards allocated to stakers this week.
The chart below shows that the ADA Reward Rate increased from 2.97% to 3.18% on November 17, eclipsing the inflation rate of 2.63%. But importantly, this historic move marks the first time that the Cardano reward rate has surpassed the inflation rate in the last 90 days.
The reward rate is determined by the protocol’s design and is intended to incentivize participants to stake their coins and contribute to the network’s security. Conversely, the inflation rate determines how many coins are added to the circulation.
When the reward rate exceeds the inflation rate in a staking system, it generally means that stakers are earning rewards at a rate higher than the rate at which new tokens are being introduced. This scenario has a few potential bullish implications.
Firstly, the combination of reduced circulating supply and increased scarcity puts upward pressure on the token’s price. This expectation incentivizes investors to keep their tokens staked to compound their profits rather than sell. Hence, this could create a bullish cycle of increased ADA staking and reduced market supply.
Hence, investors can anticipate further Cardano price upswing in the coming weeks if this bullish dynamics of the reward rate exceeding the inflation rate persists.
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ADA Price Prediction: Early Rebound From $0.35?
Based on the on-chain metrics analyzed above, Cardano’s price looks set to reclaim $0.40 if the current staking dynamic persists.
The Global In/Out of the Money (GIOM) data, which groups the current ADA holders according to their entry prices, also affirms this positive price forecast.
It shows that the bulls must first scale the initial resistance at the $0.39 area. As depicted below, 222.430 addresses had bought 5.78 billion ADA at the average price of $0.39. But if those investors HODL firmly, they could trigger an instant ADA price breakout above $0.40 as predicted.
On the flip side, the positive prediction might be nullified by the bears if the ADA price falls below $0.30. However, in this scenario, the bulls could establish a support buy-wall at $0.33, which is the average price that 462,080 addresses purchased 3.97 billion ADA. Should this support level remain intact, it is likely that the ADA price will likely avoid a major bearish reversal.
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