Analyzing Cardano’s potential for price correction amid Djed stablecoin launch
- Cardano’s stablecoin will be launched next week.
- ADA will likely shed the gains it has recorded so far this year.
Cardano’s [ADA] native over-collateralized stablecoin, Djed will be launched “next week,” as per a 24 January blog post published by COTI, the layer-1 scalable enterprise network powering the coin.
We are pleased to share another update about Djed's progress and to inform you that the launch is scheduled for next week!
Read more: https://t.co/7kPjfGMNmk$DJED $COTI @InputOutputHK @Cardano pic.twitter.com/mHA5KVblay
— COTI Foundation (@COTInetwork) January 24, 2023
Realistic or not, here’s ADA’s market cap in BTC’s terms
According to the publication, following its launch in the coming days, the over-collateralized stablecoin and its reserve coin, SHEN, will be listed on the Singaporean cryptocurrency exchange, Bitrue.
🔔$DJED $SHEN exclusive dual listing coming to #Bitrue Spot Trading!
🚀#Bitrue will be the first exchange to list $DJED and $SHEN @COTInetwork
✅Trading starts soon
✅Stay tuned for exclusive events!👉Details: https://t.co/BvmhnVw1QA #DJED #SHEN pic.twitter.com/G1kcvYNOIJ
— Bitrue (@BitrueOfficial) January 24, 2023
Due to its nature as an over-collateralized stablecoin, Djed will be backed by Cardano’s native coin ADA and reserve coin SHEN.
Over-collateralized stablecoins are backed by assets that have a higher value than the stablecoin itself. This is in contrast to other types of stablecoins, such as those backed by a fiat currency or those that use algorithmic mechanisms to maintain their value. Thus, there are concerns about their long-term stability.
There have been several instances of over-collateralized stablecoins that have failed in the past. One example is Basis Cash [BAC] owned by disgraced founder Do Kwon. It was a stablecoin project that raised $133 million in funding from venture capital firms. However, the project shut down in December 2018 after facing regulatory challenges over its backing.
Another example was Carbon [CUSD], an algorithmic stablecoin that was over-collateralized with Ethereum [ETH]. However, the project also shut down due to regulatory challenges.
ADA sees a pullback
Exchanging hands at $0.3564 per coin at press time, ADA’s price declined by 6% in the last 24 hours. After closing 2022 on a tumultuous note, ADA’s price rose by 40% since the year began, data from CoinMarketCap revealed.
With waning buying pressure and increased profit-taking in the last few days, ADA’s on-balance volume (OBV) was spotted in a downtrend on a daily chart. As of this writing, the alt’s price was 43.44 billion, having dropped by 1% since 22 January.
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A steady fall in a crypto asset’s OBV is often taken as a bearish signal. It typically indicates that there is more selling pressure than buying pressure, culminating in a fall in an asset’s price. Since 22 January, ADA’s price has fallen by 5%.
An assessment of ADA’s Simple Moving Average (SMA) revealed a resurgence of a bearish trend in the market. At press time, the 50-day moving average was positioned below the 200-day moving average. This is generally a sign of a downward trend.
