In October, the exchange rate of ada to usd has performed with heightened volatility, doubly impacted by the mood in the crypto market as well as swings in the US dollar’s liquidity. As of October 25th, the monthly price range for ADA/USD widened to 28.6%, declining to $0.24 (October 2nd) before surging to $0.31 (October 20th). The total monthly profit was approximately 4.3% (CoinGecko data), behind Bitcoin (11.2%) and Solana (58.6%). In terms of volatility, the 30-day annualized standard deviation of ADA is 65%, above 9.5% of the US Dollar Index (DXY), and hence it is a high-risk asset. If a trader has invested $10,000 at the beginning of the month, the current amount is approximately $10,430. After deducting the transaction costs (e.g., Binance 0.1% processing cost), the net return is approximately 3.9%.
Market structure consists of the ada to usd trading volume concentrated on the largest exchanges. The largest is Binance with 42% (mean daily trading volume of 180 million US dollars), followed by Coinbase at 15%, and Kraken at 8%. On October 12th, following the shocking 3.7% year-on-year jump of the US CPI, ADA dropped 7.3% in one single day, while the US dollar index rose 0.9%, symbolizing the squeeze of safe-haven assets on the cryptocurrency market. On-chain metrics also indicate that active accounts on Cardano’s chain have fallen by 12% during this month (average 187,000 to 165,000 per day), and an average fee paid for an online transaction is 0.17 ADA (circa 0.04 US dollars), down by 6% compared to September.
Macro-economic correlation analysis confirms that ada to usd is negatively correlated with the US Treasuries’ yield (correlation coefficient -0.63). On the 19th of October, the 10-year US Treasury yield pierced the 5% barrier for the first time in 16 years, and the price of ADA decreased by 4.8% in 24 hours. Meanwhile, the overall locked value (TVL) of Cardano’s DeFi increased in the opposite direction to 460 million US dollars (8% up month-to-month), of which the liquidity staking protocol Indigo accounted for 120 million US dollars (26%), helping to temper the macro negative influences. Technically speaking, ADA’s 14-day RSI, from 38 to begin the month, hit a high of 52, having moved away from the level considered oversold. However, MACD continues below the zero axis and records marginal short-run bull momentum.
Regulatory progress has picked up volatility. For instance, on the 16th of October, the US SEC postponed the approval vote on the ARK Bitcoin ETF, causing the market cap of the crypto market to evaporate by 2.3% in a day and ADA dropping by 3.1%. On the other hand, with the stringer expectation of the Federal Reserve’s “Higher for Longer”, size of US dollar money market fund increased to 5.6 trillion US dollars (ICEP data), weakening the attractiveness of risky assets. While historically ADA’s mean return in October was -2.1% (sample period 2017-2022), its performance in 2023 bucked the trend, something that may be related to the optimism for the Cardano Hydra upgrade (TPS was increased to 1,000).
The risk-return analysis shows that the Sharpe Ratio for holding ada to usd is 0.15 (calculated at a risk-free interest rate of 5.3%), which is much lower than 1.2 of the S&P 500 index. If hedging is desired by investors, they can purchase the ADA Put Option through the options market. The option with an exercise price of $0.25 that expires in November has an option premium of 8.5% (Deribit data). As for future catalysts, the Federal Reserve’s November rate move (12% probability of interest rate hike) and Cardano Summit 2023 tech release can be potential nodal points for price breakouts. Technical buying can drive the price by more than 20% if ADA breaks above the resistance level of $0.33 (the year’s downtrend line).