CRYPTO CORNER EPISODE 293
Market Analysis, Updates, News & Reviews
In today’s episode I give you a break down on Cardano ADA and try to answer the question is Cardano a good investment in 2021.
In the video episode I provide:
☝These are my opinions, not financial advice, always DYOR.
Cardano is a cryptocurrency that rapidly gained traction after its launch in Sept. 2017.
Since then, the token has made a stunning 7,080% gain in market value, far outpacing Bitcoin’s 910% gain during the same period. As a result, Cardano is among the 10 most valuable cryptocurrencies, currently sitting at number 4 , with a fully diluted market value of about $91 billion.
The Cardano project launched under the supervision of Charles Hoskinson, co-founder of Ethereum, after a disagreement with his fellow co-founder Vitalik Buterin who wanted Ethereum to remain a non-profit project. Hoskinson, however, wanted to accept venture projects to advance Ethereum. Thus, Cardano was born and remains under development by the Cardano Foundation – a for-profit organisation.
Cardano was the first cryptocurrency based on a proof-of-stake (PoS) network instead of the more established proof-of-work (PoW) model.
In PoW networks such as Bitcoin, miners are responsible for validating transactions on the public blockchain ledger by solving complex algorithmic puzzles via graphics processing units (GPUs). However, the mining difficulty increases exponentially over time, so miners need to purchase more advanced GPUs as time progresses, consuming more electricity and the electrical consumption by Bitcoin in particular, was a topic of much controversy over the last few years, culminating in a very public criticism by Elon Musk and his company Tesla, who briefly added Bitcoin to its payment methods for their cars, but shortly after that they stopped accepting the cryptocurrency until more eco-friendly mining is adopted.
POS is a greener alternative, due to the very different structure of the mining process – I explained the differences in a separate post – part of my Crypto Jargon series.
Briefly explained, those who own the token and choose to become stakeholders, they validate transactions and run nodes. Large stakeholders can earn an “interest” of 6.59% per year by running a stake pool.
If you are with a smaller stake, you can also delegate your ADA tokens to a stake pool, and earn roughly the same gross return before a commission of 3.91%. But keep in mind that there are 32.9 billion Cardano tokens in circulation out of a total 45 billion. So the inflation-adjusted return is lower – around 2%.
This may seem little, but by far the biggest profit comes from the price appreciation in market value – as of right now, ADA has gained 1489% in the past year, compared to 310% for Bitcoin and 718% for Ethereum.
The token is becoming steadily more innovative. Last year, the Cardano Foundation launched sharding for the tokens, which allows the partitioning of the network into local nodes. This enables faster processing times of 1,000 transactions per second per node (or 1 million transactions per second for the whole network). By the end of the year, Hoskinson plans to integrate smart contract functionality, allowing Cardano to match the utility of Ethereum. This is in fact the biggest catalyst of the price of ADA right now, the date for the upgrade named ALonzo, which will enable smart contracts creation on Cardano was announced last Friday and it’s due on September 12th or 13th depending on the time zone you’re in, so roughly four weeks from today.
This is why ADA has jumped by +53% in the last week alone and it will continue its rise in the coming weeks as the upgrade comes closer – this is a typical buy the rumor sell the news event and I wouldn’t be surprised if we see some selling happening as the upgrade comes into play – this will possibly cause a short term correction in market value, but I don’t anticipate a huge dump or price crash of any significant amount.
It’s also worth noting that smart contracts will take time to be programmed, so we cannot expect to see them coming into effect at least until November in my opinion, but I could be wrong.
So, back to the question of is Cardano a good investment? I personally think so, but I am a speculator, I don’t invest in altcoins for the long term and I do take profits at big pumps like what we’re seeing right now.
The biggest problem Cardano faces is a lack of adoption. Right now, it’s primarily start-ups that use the technology, although it does have a few major partners like PricewaterhouseCoopers and Wolfram Alpha (an engine that solves complex mathematical problems, especially popular in colleges). So far it has not been able to attract much attention from governments, aside from small countries like Georgia.
With its hefty market cap, investors are clearly pricing in the possibility of smart-contract implementation leading to greater network adoption. Of course, that is possible. But until that happens, I would rate Cardano as suitable only for speculative investors like myself.
In the video above, I also dive into the chart of Cardano and look at the technical analysis point of view and what we can expect for the coming days/weeks, so take a look at the second part of the video for this.
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8 thoughts on “Should You Invest In Cardano (ADA) in 2021?”
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