Dead Crypto by Shakedown Street / OpenSea
Cardano is a Layer 1, proof-of-stake blockchain, founded by the peripatetic Charles Hoskinson in 2017. Hoskinson was also a co-founder of Ethereum, but left that project to pursue a more scalable solution that he believed was better. While Cardano remains in the top 10 coins in terms of market cap, it has struggled in finding traction with users, developers, or adoption compared with other cryptocurrencies. As a result, the price of Cardano’s native token, ADA, has fallen from a high of $3.10 in November of 2021 to just under 37 cents at the time of this post.
Pressure is starting to build up on Cardano to show the scale promised, and investors are growing impatient with Hoskinson and his team. The coin, with a much smaller number of use cases than Ethereum, has begun to reflect this inadequacy in its price. The days of being called an “Ethereum killer” seem oddly quaint now, as the only thing being “killed” is the Cardano token price.
Many believe that Cardano is dead, but the jury is still out. The glaring reason why Cardano is falling is that, like every other cryptocurrency, it tracks the price of Bitcoin.
But that isn’t the only reason.
The price of ADA is also not helped by the fact that Hoskinson doesn’t care about the price and in fact is actively hostile towards anyone who dares wonder if the price will ever rise. In any other company a CEO that presided over an 80% drop in share price and shows no interest protecting investors would be fired. That’s not the case with Cardano and Hoskinson.
Here’s how Hoskinson feels about community members that have stood with Cardano through thick (but mostly thin) in terms of weathering a steep drop in price.
“Why do you care? The whole definition of the value of things is up for grabs.”
That’s not exactly music to the ears of patient Cardano investors. It’s akin to Marie Antoinette recommending cake over bread. It smacks of entitlement (Hoskinson is already a billionaire) and a willful disregard for those who are staking ADA in the hopes of maybe being able to afford to send their kid to college.
Higher interest rates, reduced QE, and foreign policy uncertainties are weighing heavy on both crypto markets and equity indices. Cardano, along with Bitcoin has moved mostly alongside the Nasdaq exchange, suggesting the blockchain is being treated more like a technology investment rather than a store of value.
This makes some sense, since the prices of technology stocks are generally predicated on future potential.
Crypto investing is based primarily on speculation, too; only the best-developed projects today have solid use cases. Much as money is flowing out of speculative technology stocks and into valuable stocks, we are seeing money flowing out of speculative altcoins such as Cardano and into more tangible investments, or simply into cold, hard cash.
As the rush of liquidity continues, cryptocurrency investors are likely selling off their less-useful holdings first.
Financial analyst and crypto trader Zach Watson made a bearish announcement about Cardano, saying, “it is ridiculously slow, from the perspective of transactions per second, when compared to the rest of the coins. It is 250 TPS, compared to 65,000 for Solana.
The team is always saying that they are coming with faster features, better improvements, etc. Yet things are always being delayed and delayed, so their actual products are still really nowhere”.
This disappointment has proven shared throughout the cryptocurrency community; even Cardano holders who are most devoted are starting to express their disappointment, with the token touching only 40 cents so far this year.
That should not be enough to declare, with any certainty, that Cardano is dead, but things will probably need to change before it is able to climb back up in value relative to competitors. Cardano does have some things going for it though.
Its governance mechanism, called Ouroboros, is a technical marvel, and there are a lot of use cases for this chain. That might not be enough to make it long-term success in an ultra-competitive layer-one blockchain race.
After reaching an all-time high of almost $3, Cardano’s ADA token is currently sitting around 37 cents. With ADA down over 80 percent from all-time highs, the token still has a market cap in excess of $17 billion, keeping it among the top 10 in terms of token market capitalization. Just two slots down, in number 10, is Dogecoin, which has nearly $11 billion of market cap.
This comparison shows that community and hype certainly drive higher valuations for cryptos. Without actual utility or technical progress, these speculative coins are probably going to fall the fastest. With this recent price movement, it is hard to fault investors for wondering whether or not Cardano is dead, but there is still a lot of potential to bring it back.
The cryptocurrency markets go through many cycles. However, the markets’ early days have made understanding the cycles that cryptos go through challenging, at least when compared with equity indices such as the S&P 500.
While stock markets have historically performed worse during summer months than during the winter months, such links are not reliably observable with cryptocurrency. The seasonality of the stock market is what gave rise to the phrase, “Santa Claus Rally” for winter markets, and “sell in May, go away” for summer markets.
The market’s failure to forecast the cycles has not stopped it from earning monikers. Two types of market cycles have emerged. One is “crypto winter,” which acts a lot like the bear market of stocks.
Bitcoin and every other altcoin are under massive sell-off pressure, losing much of their valuation. Like bear markets, cryptocurrency winters usually last months, not years.
Another cycle, which begins as Bitcoin prices fall or stagnate, is the “altcoin season”.
This is when altcoins such as Ethereum, Cardano, or Solana surge in value relative to that of Bitcoin. The first real season for altcoins occurred at the end of 2017, beginning of 2018.
It is not yet known what kind of cycle the markets are in, but with Bitcoin falling in value and altcoins trailing in its wake, it sure seems to be the first. It is highly unlikely this selloff is Cardano’s last.
While the team has not delivered, the community is big, and Charles Hoskinson has proven himself a force in the cryptocurrency world.
Despite the challenges Cardano faces it is going to take many other cryptocurrencies failing before Cardano is at risk of extinction.
For those brave of heart Cardano is available for purchase from most crypto-exchanges, including eToro and Crypto.com. Cardano is also available for trading on Decentralized Exchanges (DEX). If you own a crypto wallet such as MetaMask, you can link up with a site such as Uniswap and begin trading the wrapped version of ADA, which is located in the Ethereum network, called sADA.
As with any investment, do your own research and never risk more money than you can afford to lose.
Jay Speakman is a technology writer based in San Francisco, California. He writes on the topics of blockchain, cryptocurrency, DeFi and other disruptive technologies. Clients include Avalanche, Be[in]Crypto, Trust Machines and several blogs devoted to blockchain gaming. He will not rest until fiat currency is defeated.
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