Cardano (ADA) Competes with Leading Altcoins
After a few days of shaky prices and a deep cut following an upcoming eToro delisting, Cardano (ADA) seems to be back on track. The most optimistic predictions see the coin catch up to the likes of Terra (LUNA) and other platform coins, on expectations of building its own set of DeFi and games.
ADA jumped to $1.73 late on Thursday, adding about 6% in defiance of the overall market drop. ADA took over after the new climb of Terra (LUNA), an already more established platform for distributed applications, gaming and decentralized money.
ADA is yet to recover this year’s all-time high just under $3, but the latest price action has re-sparked more extreme predictions. At the same time, ADA is the receiver of multiple criticisms over the years for promising a smart contract launch that failed to materialize in time.
The recent rally raised expectations ADA may once again return to leading the gains. The past months saw funds flow into a group of projects that managed to increase locked-in value and give support to new decentralized finance hubs.
For ADA, the biggest hope remains the launch of smart contracts on the Cardano network, and the proof they can perform as well as other blockchains. The ADA rally may attract new retail investors with the idea that the asset is promising. ADA remains a risky proposition, a blockchain that has gained prominence but still lags in real smart contract deployment and distributed apps.
There is no guarantee ADA will go through another price appreciation cycle, but it may satisfy the demand for actively moving assets as funds flow between altcoins. ADA may also cause some problems with its security status for US-based investors, but for now, it remains traded on the Coinbase exchange with no adverse comments from regulators.
Is ADA Overheating
The recent positive days for ADA sparked significant social media hype, with a warning on potentially misleading new investors.
After retreating to $1.69, some traders believed ADA has no energy for a whole new expansion cycle and the recent rally reached its peak.
ADA Supply is Limited
Despite the potential for volatility, the supply of ADA is only partially used for trading. On-chain data show 72% of the coins are staked to support the network.
Building a decentralized economy and smart contracts means a wider potential for coins existing mostly off centralized exchanges, with an incentive to hold onto the assets. ADA has limited acceptance as collateral for DeFi, as it runs on a different blockchain and may require special bridging to other platforms.
Is Cardano Getting Attention from Developers
Because building on the blockchain is highly decentralized, not all projects receive the same attention. The announcement for new projects does not translate into successful startups, but there are signs of building on the Cardano blockchain.
Despite the hype, most distributed apps only have a handful of users, and very different popularity measures. However, the appearance of Cardano-based projects for now refutes the attacks that the platform is a ghost blockchain with no additional capabilities.
Funds Keep Flowing into LUNA
One of the reasons for ADA skepticism is the recent rally of Terra (LUNA). The expanding supply of UST lifted demand for LUNA and helped drive prices even higher, to $69.39 on Friday.
Because LUNA backs UST, the decentralized dollar-priced stablecoin, a rising price may boost the short-term stability of UST. However, LUNA volatility may prove riskier.
Altcoins Gain More Influence Each Day
Despite expectations for a year-end Bitcoin (BTC) rally, the coin’s dominance dropped to 41%. At the same time, Ethereum (ETH) and altcoins hiked to higher valuations and show more funds flowing in, with more assets hitting all-time highs.
The ETH market cap dominance shifted to 20.7%, while the collection of smaller altcoins now makes up more than 20.86% of the market. Another roughly 15% goes to leading altcoins with the highest market valuations.
Former leading altcoins, considered to be blue chips, have diminished due to lack of innovation. The new crop of projects arrives with more well-founded use cases, often branching into tokenized gaming.
In the past, altcoin cycles saw funds flow back into BTC. But this time, altcoin platforms compete to lock in their own value. Binance Coin (BNB) become a ticket to participation in a growing ecosystem of activity, including collectibles and gamified earnings.
Demand for the next big project to repeat the success of Solana (SOL) has also lifted the valuation of Avalanche (AVAX), LUNA, Decentraland (MANA), Gala Games (GALA) and many other platform coins and tokens.
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