Latest / The Cryptocurrency Economy with Fexingo: Bitcoin, Ethereum, and Digital Money Markets / Why ADA Is Down 19 Percent in a Week
Transcript
- Lucas: Bitcoin is off three percent in five days. Ethereum down eleven. But look at Cardano — ADA has lost nineteen percent since Tuesday. Luna: Nineteen percent — that's nearly double the next worst performer in the top ten. What's going on with Cardano specifically? Lucas: It's a combination of macro pressure and ecosystem-specific trouble. The hot jobs report on Friday — nonfarm payrolls came in well above expectations — pushed expectations for Fed rate cuts further out. Chair Warsh made that pretty clear in his comments. Luna: Right, rate-sensitive assets getting hit. But that should hit everything, not just ADA. Lucas: Exactly. The macro explains maybe a third of the move. The rest is Cardano-native. The biggest single event was the de-pegging and effective collapse of the USDA stablecoin last week. Luna: USDA — that was the algorithmic stablecoin built on Cardano by a project called Ardana, right? I remember it was supposed to be Cardano's answer to DAI. Lucas: That's the one. Ardana launched USDA in late 2024 with a lot of fanfare. The idea was a fully collateralized algorithmic stablecoin using ADA and other Cardano-native assets as backing. But on June 2nd, USDA lost its peg to the dollar and dropped to about eighty-two cents. Luna: Eighty-two cents — that's a full eighteen percent de-peg. Not a small wobble. Lucas: Right. The team paused redemptions, which triggered a panic. Total value locked in usda related liquidity pools on SundaeSwap and Minswap collapsed from about 340 million ADA equivalent to under 40 million in three days. That's a loss of nearly 90 percent of the liquidity. Luna: So ADA holders who were using USDA as collateral suddenly had their positions liquidated or severely impaired. That would generate a lot of forced selling. Lucas: Exactly. And it cascaded. As ADA price dropped, more USDA positions became undercollateralized, triggering more liquidations, more selling. The whole DeFi layer on Cardano took a hit. Total value locked across the entire Cardano ecosystem fell from about 580 million dollars to 320 million since June 1st. Luna: That's a 45 percent drop in TVL in less than a week. That's brutal. Lucas: It is. And the timing is terrible because there were already concerns about SEC treatment of proof of stake tokens. If you remember, the SEC's case against Coinbase — which is still ongoing — specifically alleged that several proof of stake tokens, including Cardano, are securities. Luna: Yes, and there's been chatter that the SEC might be preparing a more aggressive stance post-election. I saw a headline this week about a potential enforcement action against a major exchange for listing unregistered proof of stake securities. Lucas: That rumour alone can spook capital. And it compounds the existing narrative: Cardano has struggled to gain real traction compared to Solana or Ethereum layer-twos. Developer activity has been declining for months. The number of daily active developers on Cardano is down about 30 percent from its peak in 2024. Luna: So you have a chain that's already perceived as slow-moving, losing developer mindshare, then a stablecoin blowup, then regulatory headwinds. That's a lot of negative signals concentrated. Lucas: Yeah, and the price action reflects that. ADA is trading at sixty-two cents as of this morning — down from a local high of about seventy-seven cents in late May. Support at sixty cents is the big question now. If that breaks, the next floor is around forty-eight cents from late 2024. Luna: Is there any positive catalyst on the horizon for Cardano? I know they've been working on the Hydra layer-two scaling solution. Lucas: Hydra is live in testnet, but the mainnet launch keeps getting pushed back. The team says Q3 2026. But even then, adoption is uncertain. The real question is whether Cardano can attract meaningful DeFi activity again after this confidence shock. Luna: It's interesting — we talk a lot about Bitcoin and Ethereum as the anchors, but episodes like this remind us that for individual tokens, ecosystem-specific risk can overwhelm macro. Nineteen percent in five days is not normal. Lucas: It's not. And I think it's worth asking whether this is a buying opportunity or a value trap. Some analysts argue that ADA is oversold — the relative strength index hit 22 yesterday, which is deeply oversold. But others say the fundamental thesis has weakened. Luna: If you look at on-chain metrics like the number of active addresses, that's actually held fairly steady — around 35,000 daily active addresses. So the user base isn't disappearing. But the value being transacted has dropped sharply. Lucas: Right. The transaction volume in dollar terms is down 60 percent from a month ago. So people are still there, but they're not deploying capital. That's a wait and see posture. And that makes sense given the uncertainty around USDA recovery and SEC action. Luna: Speaking of capital deployment, there's something else that caught my eye. The open interest in ADA futures on exchanges like Binance and Bybit has dropped nearly 40 percent since the de-pegging. That's a lot of leveraged positions being closed. Lucas: That's consistent with forced liquidations. Funding rates turned deeply negative — at one point negative 0.05 percent per eight hours, which is extremely bearish. That suggests most of the long leverage has been wiped out. Luna: So if you're a contrarian, that could signal a capitulation event — the sort of flush that precedes a bounce. But it's risky to catch a falling knife when the fundamentals are still deteriorating. Lucas: Exactly. And this is where the macro picture ties back in. If the Fed stays hawkish through the summer — and the jobs report suggests they will — risk assets broadly could remain under pressure. Cardano, with its own specific problems, is likely to be hit harder than the market average. Luna: So the advice for listeners: if you're holding ADA, watch the sixty-cent level. If it breaks, there could be another leg down. If it holds, the oversold bounce could be sharp. But don't confuse a bounce with a recovery. Lucas: That's a good way to put it. And this is the kind of analysis that takes time and resources to put together — we're digging into on-chain data, regulatory filings, funding rates every day. If walking through the economy with us has made something click for you, a couple of dollars a month genuinely makes a difference. It's what keeps this show ad-free and independent. Luna: Yeah, it really does. We hear from listeners who say, 'I never understood why a stablecoin de-peg matters until this episode.' That's the whole point. Small contributions from people who find value here add up. Lucas: If that sounds like you, you can find us at buy me a coffee dot com slash fexingo. No pressure — just if the show has been useful to you. Luna: And back to Cardano — one thing I'm watching is the Ardana team's next move. They've promised a full post-mortem and a plan to re-peg USDA. If they can restore confidence, that could be a catalyst. If not, the damage may be lasting. Lucas: Yeah, the next week is critical. The DeFi protocols on Cardano — SundaeSwap, Minswap, VyFinance — they're all scrambling to adjust their liquidation parameters and risk models. If they can't stabilize, more capital will leave. Luna: It's a stress test for the entire Cardano DeFi ecosystem. And so far, it's not passing. Lucas: I'd say it's a test of whether the ecosystem has real resilience or whether it was built on a fragile foundation. We'll know more in the next month. For now, ADA holders are in for a volatile ride. Luna: Well, we'll keep tracking it. Lucas, thanks — really helpful breakdown. Lucas: Thanks, Luna. We'll be back tomorrow with another episode.