The Cardano ecosystem is preparing for the launch of its Djed algorithmic stablecoin that is backed by ADA. The team at the Djed stablecoin Tweeted this past weekend that Djed is on track towards a launch within January, as seen below.
And yes, $Djed is still on track for launching THIS month 🚀
— 𓊽 Djed 𓊽 (@DjedStablecoin) January 14, 2023
Djed Will be an Overcollaterlaized Stablecoin
However, the team at COTI, which is developing Djed, believes that referring to the stablecoin as an algorithmic one might not be appropriate. They recommend referring to it as an over-collateralized stablecoin.
They explained:
An important point to note is that Djed uses exogenous collateral ($ADA). This means that the collateral that backs $DJED, $ADA, has its own utility (its primary use-case is separate from the Djed stablecoin project), and is completely independent of the Djed protocol…
Collateralization is another factor that stands $DJED out. $DJED is overcollateralized by 400% — 800%, this means that it has 4 to 8 times more underlying value backing it, than the total sum of $DJED minted.
The Launch of Djed Could Boost Cardano Towards the $0.40 Price Area
The fact that Djed is overcollateralized by a factor of 4 to 8 means that a corresponding amount of ADA will be locked as collateral for every Djed issued. Therefore, a substantial amount of ADA will leave active circulation for the Djed stablecoin to function. With the available ADA contracting, its price should be able to move towards the $0.40 resistance area due to the ongoing positive crypto market sentiment.
The one-day ADA/USDT chart below, courtesy of Tradingview.com, shows that Cardano has broken out of the earlier identified falling wedge and is testing the 100-day (yellow) moving average as support. Cardano is also bullishly above the 50-day (white) and 100-day moving averages, as well as the $0.33 support area.
Cardano‘s next move could be to retest the 200-day (green) moving average at the $0.40 price area.
However, its daily MFI (green), MACD and RSI (red) all hint at an overbought scenario that should result in a short-term pullback or consolidation at current levels.
In the event Cardano undergoes a correction, the 50-day moving average and the upper boundary of the falling wedge should provide adequate support at the $0.30 price area.
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