In the competitive and crowded world of cryptocurrencies, Cardano stands out. Think of it as a new-generation blockchain designed to be more secure, scalable, and sustainable. The project was founded in 2014 and officially launched its native token ADA in 2017. Cardano offers a platform for building smart contracts (like digital agreements) and creating decentralised applications while claiming to be more secure and efficient than competitors.

 Chen says that Cardano is alive with activity, with ”135 projects launched and 1,264 projects in various stages of development” on the chain. However, she also adds that it’s not all smooth sailing, noting “it’s clear that not all projects have flourished”. Regulatory scrutiny and significant advancements in layer 2 blockchain technology further threaten the progress of projects building on Cardano. 

While Cardano was built to address the shortfalls of competitors like Ethereum, it has struggled to gain any significant level of adoption. Now that Layer 2 blockchain solutions have arrived on Ethereum, significantly decreasing transaction costs and increasing confirmation speed, Cardano’s once-unique features are no longer a significant catalyst for adoption.

Despite this, Chen notes that “the foundation’s focus on development education, new infrastructure like stablecoins, programming languages, and wallets, and the growth of multi-chain solutions” set the tone for its ambitious future roadmap. A keen focus on next-gen tech, innovative digital coins, and user-centric solutions is at the forefront of this project. However, whether they can deliver on any promises is yet to be seen.

Like many crypto projects, Cardano’s price history chart resembles the the path of a theme park roller coaster: teetering highs, followed by precipitous drops.  In 2017, the Cardano blockchain and its native token, ADA, officially debuted in the crypto world at $US0.0024.

ADA was originally greeted with scepticism. Chen recalls many detractors dismissing the project as just another “high market-cap sh*tcoin,”. However, Cardano would soon defy these early judgments. “One of the pivotal moments for ADA was the Alonzo hard fork in 2021, which unlocked its smart contract capabilities,” says Chen. This technological leap and the 2021 crypto bull market set the stage for ADA’s meteoric rise.

The enthusiasm and anticipation surrounding Cardano’s smart contracts led to ADA’s valuation surging by 30 times. Its market cap touched an impressive $US94.9 billion, which established ADA as a serious contender in the crypto race.

Such an ascent was distinct,” Chen says. “ADA, during this phase, even managed to outpace giants like BTC and ETH in growth rates.”

Yet, with great crypto highs come inevitable corrections. Post the peak of the Alonzo hard fork in September 2021, ADA faced a downward shift.

“After the Alonzo-driven peak, ADA’s price trajectory began oscillating, leading to the varied trends we observe in 2023,” Chen says.

Analysing Cardano’s on-chain data provides key insights into its current activity. The total transfer count for Cardano has reached 73.4 million, averaging between 50,000-70,000 transfers daily. This might seem impressive at first glance, but the differences become stark when placed side-by-side with Ethereum.

Ethereum, being a significant player in the blockchain space, records daily transfers in the millions. In contrast, Cardano’s numbers, while growing, are still just a fraction of Ethereum’s daily activity. This highlights the uphill journey Cardano faces in its quest to compete with Ethereum’s dominance.

Chen notes: “ADA’s staking has experienced a 300% surge this year alone, with around 22.79 billion ADA staked, resulting in a commendable staking ratio of 63%.”

However, the slight decline in daily active users over the past year is noteworthy. “Over the past 12 months, daily users have fluctuated between 40,000 to 80,000, but recent data indicates a trend towards 60,000.”

Transactions are not the only metric of activity, however. One primary indicator of a project’s success is the number of developers working on the chain. Chen adds: “Cardano boasts of deploying over 30 million smart contracts and hosting approximately 8.7 million tokens.”

Yet, challenges abound. Despite 135 projects already live and 1,264 in development stages, only some ventures find success.

“The TVL (Total Value Locked) in Cardano’s DeFi ecosystem stood at $US177 million in August 2023, marking a 300% rise from the start of the year,” Chen says.

“However, this figure is still only half its peak in March 2022.” Once again, compared to Ethereum, with a TVL of over $US23 billion, it highlights how far Cardano has to grow to compete.

Touching upon ADA’s immediate price trajectory, Chen offers caution, “In the short term, ADA’s potential to deviate from BTC’s prevailing trend seems restricted. A resistance point near US$0.6 is evident.” Nevertheless, glimmers of optimism emerge. “With the Foundation prioritising areas such as development education, innovative infrastructure including stablecoins, programming languages, wallets, and the emergence of multi-chain solutions like HydraHead and Milkomeda C1, there are positive indicators in sight.”

Before we delve into the possibilities, let’s understand two essential market perspectives. The bull case is optimistic, highlighting scenarios where Cardano’s price could rise. In contrast, the bear case offers a more cautious stance, outlining why Cardano’s price might decline. These two contrasting views provide a balanced understanding of potential market trajectories for the project.

The Bull Case

Cardano is not without its strengths and opportunities. The Cardano Foundation has placed a significant focus on development education, the creation of innovative infrastructure, and the expansion of multi-chain solutions. These efforts cannot be understated.

Chen is optimistic about certain facets of Cardano’s future: “Cardano’s reputation as an OG cryptocurrency project remains robust. The backing it receives from multiple entities and communities gives ADA a unique price elasticity.” Indeed, this collective support system can act as a springboard for ADA’s potential upward movement.

Additionally, the almost cult-like group of supporters helps to push the project forward in the right direction. Half the battle for many projects is gaining a strong support base from avid users, and for Cardano, this is something that the project has no shortage of. Another question is whether the current level of support is enough to push the project back into the limelight.

The Bear Case

No coin, no matter how promising, is exempt from challenges. Despite Cardano’s concerted efforts in ecosystem development, it still faces obstacles.

As highlighted by Chen, a concerning point is that “Cardano’s ecosystem is presently heavily reliant on its native token, and its user engagement and trading volumes remain moderate at best”. Furthermore, only some projects within the Cardano ecosystem have found success, with many failing to gain much traction. “For genuine, substantial growth, the network needs much more intensified operational efforts,” Chen says.

The rise in popularity of layer 2 blockchains has made many of the lower-cost layer 1 blockchains, like Cardano, virtually redundant. The project must work hard to find its niche in the market among other blockchain projects.

Additionally, uncertainties can’t be dismissed. Factors ranging from the overall development of the ecosystem, and regulatory decisions from bodies like the SEC, to broader macroeconomic conditions, all play pivotal roles in shaping ADA’s future.

Making a definitive judgement about an asset’s investment potential is always tricky, especially in the ever-evolving world of cryptocurrencies. However, we can make an informed assessment based on the available data and expert perspectives.

Chen adopts a measured stance on this subject. She acknowledges Cardano’s robust background, its infrastructure, and the substantial growth in its staking activity. Yet, she also underscores the need for more intensified operational efforts for it to truly flourish.

On the price front, Chen anticipates that “ADA will most likely fluctuate within the US$0.2-$0.6 range in 2023.” However, she leaves the door open for potential positive surprises, stating, “A significant breakthrough in technological progress may drive its value back above US$1.”

Like any investment, Cardano comes with its set of opportunities and challenges. Its status as an original cryptocurrency project, coupled with the strong support from its various entities and community, offers a sense of stability. Yet, uncertainties stemming from ecosystem development, regulatory environments, and global economic factors should be considered.

For Australians considering Cardano as an investment, it’s always prudent to conduct thorough research, consult with a financial advisor, and approach it as a part of a diversified portfolio. As always, investments in the crypto space should be made with a clear understanding of the risks involved.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.