Cardano's ADA Spikes 27% in a Week, Pushing 88% of Its Circulating Supply into Profit

Cardano's double-digit rally over the past week has pushed a substantial portion of the coin's circulating supply into the profit area.

Cardano’s (ADA) price has surged by 27% in the past week, pushing a large portion of its circulating supply into profit territory. However, this rapid appreciation could pose a threat to ADA's uptrend, as it may entice holders to sell and secure their gains.

According to the latest data, investors now hold 32 billion ADA coins, worth approximately $31 billion, at a profit. This staggering amount accounts for 88.40% of ADA's circulating supply. To put this in perspective, at the beginning of the month, only 40% of all ADA coins in circulation were being held at a profit.

While this certainly indicates bullish momentum in the coin's market, it also carries inherent risks. When a significant portion of an asset's supply moves into profit, it can often trigger profit-taking behavior, where holders sell to lock in their gains and secure their profits.

An analysis of ADA's market value to realized value (MVRV) ratio further highlights this risk. According to Santiment's data, ADA's current MVRV ratio stands at 76.20%.

This MVRV ratio suggests that ADA is currently overvalued, as its market value is substantially higher than its realized value. Hence, if all coin holders were to sell, they would, on average, realize 76.20% profit.

ADA's price is currently trading at $0.98, having found support at $0.93. If profit-taking activity commences, the coin's price will attempt to test this support level. Failure to hold this support would confirm the downward trend, leading ADA to drop further to $0.79.

On the other hand, if market participants largely refrain from profit-taking, this may push ADA's price up to trade above $1, reaching $1.15, a level last seen in April 2022.