Is Cardano (ADA) Dead?

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Contributor, Benzinga
May 23, 2022

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Cardano is a Layer 1 blockchain founded by the brilliant Charles Hoskinson. Hoskinson is also the co-founder of Ethereum but left the project in pursuit of what he believed to be a more scalable solution. While Cardano remains a top-ten coin by market capitalization, it has struggled in finding utility, developers or technical advantages over other cryptocurrencies.

Pressure for Cardano to display its promised scalability has begun to mount, and investors are growing impatient with Hoskinson and his team. The coin, which has far fewer use cases than Ethereum, has begun to reflect such inadequacies in its price. Many people think that Cardano is dead but the jury is still out. Is this the fall of Hoskinson’s brainchild?

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Why is Cardano Down?

The obvious reason Cardano is down is, like all other cryptocurrencies, it follows the price of Bitcoin. Rising interest rates, reduced quantitative easing and foreign policy uncertainty has weighed heavily on the crypto market and stock indices alike. 

Crypto has largely moved in conjunction with the Nasdaq exchange, signifying that the blockchain is viewed as a tech investment rather than a store of value. This makes sense in some ways, as tech prices tend to be based on future potential. Crypto is also largely based on speculation; only the most developed projects have strong use cases today. Much like money running from speculative tech stocks into value stocks, we are seeing money run from speculative altcoins like Cardano for more tangible investments or just cold hard cash.

As the liquidity rush continues, crypto investors are likely to sell their least useful holdings first. Financial analyst and crypto trader Zach Watson made a bearish statement on Cardano, “It’s ridiculously slow in terms of transactions per second, compared to other coins. It’s 250 TPS compared to Solana at 65,000. The team is always saying that they are coming out with faster features, better enhancements, etc. Yet everything always gets pushed and delayed, so their actual product has not really done anything yet.” This frustration has proven to be shared among the crypto community; even the most loyal Cardano holders are beginning to show frustration as the coin touched just 40 cents this year. This shouldn't be enough to claim with any certainly that Cardano is dead but things likely need to change before the price can rise against its competitors again.

Cardano still has a few things going for it, however. It's governance mechanism, called Ouroboros, is a technological marvel and the chain has plenty of use cases. This may not be enough in the extremely competitive Layer 1 blockchain competition to succeed in the long-term.

Cardano Price Movements

With all-time highs of nearly $3, Cardano's token ADA now rests at roughly 50 cents. With ADA more than 80% off its all-time high, the coin still holds a market cap of over $17 billion, keeping it in the top ten by token market capitalization. Just two slots below, at number 10, is Dogecoin with close to an $11 billion market capitalization. This comparison shows that community and hype can certainly raise high valuations in crypto. Without real utility or technological advancement, these speculative tokens will likely be the first to drop. With this recent price action, it's hard to blame investors for wondering whether Cardano is dead, but it still has plenty of potential to come back.

Cryptocurrency Market Cycle

Crypto markets undergo a multitude of cycles. However, the infancy of the market makes it difficult to understand the cycles crypto undertakes, at least in comparison to stock indices like the S&P 500. While the stock market historically performs poorly in the summer months compared to winter months, no such links have been reliably traced in crypto. The seasonality of the stock market is what coined the phrases,“the Santa Claus rally” for winter markets and “sell in May and go away” for summer markets.

An inability to predict market cycles has not stopped the market from earning nicknames. Two market cycles have emerged. One in which is “crypto winter,” which acts much like a bear market for the stock market. Bitcoin and all other altcoins face intense selling pressure and lose much of their valuation. Like a bear market, crypto winter typically lasts months rather than years.

The other cycle that begins when Bitcoin price crashes or lulls is “altcoin season.” This is when altcoins like Ethereum, Cardano or Solana rally in price in comparison to that of Bitcoin. The first true altcoin season occurred in late 2017, early 2018. It is still unknown which cycle the market is in, but as Bitcoin crashes and the altcoins tail behind, it certainly feels like the former.

Where to Buy Cardano

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Cardano can be bought on most cryptocurrency exchanges, including eToro and Cardano can also be traded on a decentralized exchange (DEX). If you have a cryptocurrency wallet like MetaMask, you can connect to a site like Uniswap and start trading a wrapped version of ADA on Ethereum’s network, sADA. 

So, Is Cardano Dead?

It is unlikely that this sell-off will be the last of Cardano. While the team has underdelivered, the community is large, and Charles Hoskinson has proven to be a presence in the crypto space. It will take a lot more cryptocurrencies to disappear before Cardano will be in danger of extinction. That said, Terra (LUNA) became near worthless, and the coin was above Cardano in market capitalization just weeks prior. While the two tokens are different in technicality and purpose, this recent event showed that no cryptocurrency can truly be deemed safe.

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