The price of Cardano (ADA) is experiencing a notable decline, dropping 12% since the start of the week, with a 2.6% drop recorded just today. Despite this, with a market capitalization of $20.27 billion, ADA maintains its position as the 9th largest cryptocurrency.
This recent downturn comes amid the broader crypto market experiencing mostly sideways downward movements, with ADA recording more significant losses compared to peers like ETH, which fell 7.4%, BNB 6.4%, Solana 6, 3% and XRP 6.1%.
Grayscale drops Cardano from GDLC
A crucial factor behind Cardano’s steepest decline could be linked to the recent liquidation of all ADA holdings by the Shades of gray Digital Large Cap Fund (GDLC). The fund, which currently has assets under management (AUM) worth $579 million, had Cardano making up 1.62% of its portfolio as of January 4, which equates to approximately $9.4 million.
On Thursday, Grayscale Investments announced the decision as part of its Q1 2024 review. According to the official Press releaseThe adjustment to the GDLC portfolio entailed the sale of Cardano and the reallocation of cash resources to existing Fund Components, proportionate to their weightings.
This rebalancing led to the removal of ADA from the GDLC portfolio. The final composition of the fund as of April 3, 2024 includes Bitcoin (70.96%), Ethereum (21.84%), Solana (4.52%), XRP (1.73%) and Avalanche (0.95%).
The press release detailed: “In accordance with the CoinDesk Large Cap Select Index methodology, Grayscale adjusted the GDLC portfolio by selling Cardano (ADA) and using the cash proceeds to purchase existing fund components in proportion to their respective weightings. As a result of the rebalancing, Cardano (ADA) has been removed from the GDLC.”
Grayscale also highlighted quarterly assessments of GDLC, DEFG and GSCPxE Fund compositions, designed to update existing Fund Components or add new ones based on index methodologies provided by the Index Provider. This practice ensures that fund holdings reflect the most current market trends and asset performance.
Notably, the Grayscale Smart Contract Platform Ex-Ethereum Fund still contains Cardano. Cryptocurrency is the second largest position after Solana (58.41%), with a weight of 14.56%.
In response to these developments, Charles Hoskinson, the founder of Cardano, made a pithy comment via X, stating: “Wall Street gives; Wall Street takes it.”
This succinct observation summarizes the volatile nature of crypto investments and the significant impact that large financial players like Grayscale can have on digital asset market dynamics.
Wall Street gives; Wall Street takes https://t.co/dkyrhHW4WS
-Charles Hoskinson (@IOHK_Charles) April 5, 2024
At press time, ADA was trading at $0.57. In the short term, the 100-day EMA at $0.58 is the main resistance that ADA needs to overcome to develop new bullish momentum. The 100-day EMA has served as strong support three times since mid-January. After the recent drop below this indicator, ADA is struggling to recover it. In the medium term, bulls need to break above the $0.68 level.
Featured image of Guarda Wallet, chart from TradingView.com
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