Cardano (ADA) has witnessed high on-chain activity from short-term holders (STHs) who on-boarded more than 3 billion ADA in November. This comes at the time when ADA price is trading above $1 due to the general market recovery and increased investors’ interest.
However, such a rise in STH has been observed to be a warning signal of potential price correction or consolidation in the long-term trend.
Cardano Short-Term Holders Add 3 Billion ADA in November
According to blockchain analytics firm IntoTheBlock, Cardano short-term holders currently hold 8.42 billion ADA worth around $9 billion as of 29th November. This is the highest level of their holdings in eight months, up from 5.27 billion ADA on November 5.
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This rise coincides with a crucial market rally. The rally began this month due to expectations of pro-bitcoin policies under the Donald Trump administration.
This rapid increase in short-term investors indicates that there is significant speculation within the ADA market, as traders take advantage of the rising prices.
In the past, the holdings of this investor tier have increased before significant price changes. For example, an increase in January 2022 brought short-term holders’ balances to 11 billion ADA. After that the price increased from $1.53 to $0.82 in weeks.
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The same pattern was observed in March 2023. ADA reached its high of $0.75 before dropping back down to $0.45 by mid-April.
Historical Trends Suggest Risk of ADA Price Correction
Speculative behaviour of short-term investors has been one of the leading causes of variability in prices. These investors are usually quick to sell off their ADA whenever it meets resistance. This creates further selling pressure and leads to price drops.
Previous experiences reveal the possible adverse outcomes. For instance, short-term traders bought 8.4 billion ADA during ADA’s rally this year when the prices were rising. Then sold these tokens when pressure on the prices increased in the opposite direction.
This cyclical pattern of accumulation followed by liquidation is something of a concern for the recent rally of ADA.
When ADA is trading above $1, short-term investors will be the most influential in deciding if ADA will continue the upward movement or experience another dip. These addresses are of crucial importance since they have the potential to set market trends as has been seen in the past.
Whales and On-Chain Activity Offer Potential Support
Nonetheless, the presence of Cardano whales in the market is favorable, especially considering the current state of the market. Their capacity to soak up the selling pressure from short term traders can be useful in lessening the chances of prices going down.
In addition, higher on-chain activity also enhances market trust. Recent statistics show that approximately 841,000 transactions on the Cardano network have been processed, together with transaction fees of 279,000 ADA, the highest levels seen since March 2022.
The increasing trend in the number of Cardano’s long-term holders since mid-2022 also supports the general idea that the investors are confident in the project. These factors, along with the whale activity, could contribute to the price stability of ADA.
