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Cardano (ADA), the 10th largest cryptocurrency by market capitalization, might be worth keeping an eye on, with a metric suggesting that it might be significantly undervalued.
A key indicator pointing to ADA's undervaluation is the "percentage of supply in profit" metric. The percentage of supply in profit is calculated by comparing the acquisition price of each unit of crypto against its current price and then evaluating what ratio of supply is currently in profit.
When an asset has a high supply-to-profit ratio, it usually indicates that the majority of holders purchased the asset at lower prices. These ratios can skyrocket during bull markets, for instance, from October 2023 to March 2024, and a surge is frequently correlated with overbought indicators. However, the supply-in-profit percentage indicator is best used with other metrics, such as whale accumulation and MVRV.
On-chain analytics firm Santiment, in a recent tweet, shared the supply-in-profit percentages for major cryptocurrencies Bitcoin, Ethereum, XRP, Cardano, Dogecoin and Chainlink as 89.9%, 84%, 77%, 51.9%, 76.7% and 78.2%, respectively.
🤑 The percentage of supply in profit is calculated by comparing the acquisition price of each unit of #crypto against its current price, followed by determining what ratio of the supply is currently in profit.
— Santiment (@santimentfeed) April 26, 2024
Typically, when an asset is seeing a high ratio of supply in profit,… pic.twitter.com/oRzTABgznh
Santiment recommends keeping an eye on cryptocurrencies with lower-end supply in profits, as they can often indicate undervaluation compared to the rest of the markets. This might apply to Cardano, which is demonstrating a lower supply in percentage compared to other major cryptocurrencies.
The supply-in-profit percentage presented suggests that 51.9% of circulating ADA is "in profit." This could indicate an impending price comeback for Cardano.
At the time of writing, Cardano was down 3% in the last 24 hours to $0.453 and down 6.52% in the last seven days. Cardano is also well off its all-time high, down 85.38% from the ATH of $3.10 attained Sept. 2, 2021.
Recent analysis from on-chain analytics firm IntoTheBlock indicates that ADA "stands out" among other Layer 1 networks, with only 35% of holders in profit. Whether this is an opportunity or a warning sign remains unknown.