Short Supply Triggers 54% Cardano Interest Rate Spike

Cardano

It looks like one of the most popular crypto exchanges, Binance, may be running out of Cardano (ADA) coin. This is according to a report from u.today, which indicates that investors are moving their coins away from the exchange and using it in alternative decentralized solutions and wallets given they offer a more secure alternative, as they are not reliant on a single point of failure.

Why do exchanges offer staking and increase their interest rate?

The main reason that cryptocurrency exchanges offer staking (a process whereby investors can lock up their digital assets in exchange for rewards) and increase their interest rate is to attract new users and encourage them to use the exchange.

By offering a higher interest rate, exchanges are able to have users deposit their funds into the exchange and trade on the platform. This increases liquidity and allows the exchange to make more money from transaction fees.

However, the technique isn’t always effective as the outflow trend is still on the market since 2021, suggesting a shift in market sentiment.

With Binance, the platform offers a unique opportunity for anyone who wants to earn high interest on their ADA holdings. Compared to stablecoin staking, which offers around 10% annual percentage yield (APY), Binance users can stake and earn ADA rewards for up to 54% APY.

As more investors deposit their ADA tokens on the platform, it is crucial for the stability of the supply of the coin on the exchange that the interest rate slowly gets down to an average value. This will minimize the fluctuations in the price of Cardano and help to ensure that the exchange remains stable. This stabilization of the supply should eventually lead to a decrease in volatility for the ADA holders.

A brief technical analysis on Cardano price

Bitcoin’s price deterioration over the last week has caused many altcoins to lose ground as well. Cardano was one of the few altcoins that had been able to make some gains after its $0.97 breakout on March 23, but it seems to have pulled back to pre-breakout levels in the last two days. At last check, ADA was changing hands at around $0.96, up 1.90% on the day.

If the coin of the proof-of-stake blockchain manages to retest and push through the $1 psychological level, the next target is located at $1.25. However, if the $0.95 support fails to hold, Cardano could slip below $0.90. The next target will then be $0.85.

Cardano remains in a prolonged downtrend. The $32 billion market cap cryptoasset is down 30% year-to-date and 34.5% year-over-year.

Disclaimer: The information provided is not trading advice

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