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Cardano, the 11th largest cryptocurrency by market capitalization, is currently at a critical juncture, with the ADA price showing signs of a potential breakout. However, on-chain metrics paint a more complex picture.

According to data from IntoTheBlock, Cardano's Network Value to Transactions (NVT) ratio has surged to its highest level since June. However, this indicates a significant decrease in on-chain activity relative to its price growth.

The NVT ratio is a key indicator that compares a cryptocurrency's market capitalization to its transaction volume. A rising NVT ratio shows that price increases may not be accompanied by an increase in on-chain activity, perhaps indicating overvaluation. 

For Cardano, this classic overvaluation signal remains notable given ADA's recent underperformance, which has seen it plummet 11.4% in the last 30 days.

Historically, elevated NVT ratios have often preceded price pullbacks, which suggests that without an increase in on-chain engagement, Cardano's price might struggle to maintain momentum.

Given this, there remains a potential for further downside in ADA's price, IntoTheBlock stated, with the lack of on-chain activity suggesting that the recent price increase was driven primarily by speculation. 

Cardano eyes potential breakout

Cardano (ADA) begin to rise after hitting support at lows of $0.31 on Oct. 25. The climb has continued in the last three days, and ADA might mark the fourth day of gains if today closes in the green. 

Today's rise to intraday highs of $0.351 has brought ADA closer to the daily SMA 50 at $0.355, a barrier which, if surpassed, might see the price targeting the daily SMA 200 at $0.397. Cardano's price has been confined by its daily moving averages of 50 and 200 since March 2024.

Thus, a sustained breakout above the daily moving averages would allow ADA to exit its current range trading and signal a bullish comeback. In this scenario, ADA might aim for new yearly highs past $0.76.

Expectations are high regarding Cardano blockchain's two-part Chang Hard Fork, a significant upgrade to enhance network functionality and decentralized governance. This upgrade might boost Cardano on-chain activity and perhaps trigger a breakout for the ADA price. 

Whether the indications presented by the NVT signal would be validated remains unknown, as well as where the ADA price trends next.