Cardano Centralization Fears Risk 30% ADA Price Drop

Cardano’s price has experienced a significant decline, dropping by 7.25% to settle at $0.474 as of May 22. This downward trend occurred shortly after cryptocurrency analyst Justin Bons criticized the project for its alleged centralization. Bons highlighted that Input Output Global (IOG), which is the parent company of Cardano, holds five out of the seven “genesis keys.” These cryptographic keys were instrumental in establishing the initial block of the Cardano blockchain back in 2015. Bons expressed concern that the genesis keys permit code changes without necessitating a hard fork, suggesting that IOG possesses a degree of control that is unusual for a Layer 1 blockchain. He claimed that IOG could potentially halt the chain, modify emission schedules, and even implement censorship.

Following Bons’s comments, Cardano (ADA) saw its price plummet further, setting the stage for a possible bearish market scenario that some analysts suggest could lead to an additional 30% price crash by June.

The technical outlook for Cardano points to a potential triangle breakdown. The cryptocurrency is currently undergoing a correction after hitting resistance from a known descending trendline, part of a symmetrical triangle pattern. In a bearish continuation scenario, a symmetrical triangle is identified by converging trendlines—one ascending and one descending. Traditional technical analysis suggests that the price generally declines once it breaks below the lower trendline of the triangle, decreasing by the same height as the triangle itself.

As of May 22, ADA’s price appeared to be correcting after touching the triangle’s upper trendline. Analysts predict that it could see a further decline toward the lower trendline, around $0.44, marking a 6.5% drop from current levels by the end of the month. If ADA decisively breaks below the symmetrical triangle, the price could potentially drop to the $0.336-0.366 range, representing a 20-25% decrease from current prices, depending on the breakdown point.

There is a silver lining for Cardano. The ADA price is showing signs of a bounce after testing its multi-month ascending trendline support. Should the price manage to break above its 50-3D (red wave) and 200-3D (blue wave) exponential moving averages (EMA), it could initiate a broader rally. Under such circumstances, the initial upside target for ADA could be around $0.67, which represents a 35% rise from current levels. This price point previously served as resistance in December 2023 and May 2022.

Amid this price correction, there has been an increase in ADA holdings among Cardano’s wealthiest addresses. This trend suggests that these so-called “whales” are largely dismissing Bons’s centralization warnings and continue to accumulate ADA. Specifically, entities holding between 10 million and 100 million ADA, as well as those holding between 100 million and 1 billion ADA, have been increasing their positions over the last 24 hours.

This accumulation indicates that these high-stakes investors are buying the dip, expecting future gains. Looking at a broader timeline, the 10 million to 100 million ADA holding group showed a significant increase in March and has since stabilized. The 100 million to 1 billion ADA cohort’s holdings have been rising steadily from mid-March onward.

Throughout this period, Cardano’s price has declined by over 20%, yet these whales seem to be betting on a long-term price increase. Their actions suggest confidence in ADA’s future performance despite recent centralization concerns and short-term price volatility.