The value of Cardano (ADA) is $0.26 (as of October 2023), 91.6% down from its all-time high of $3.1 in September 2021. Its on-chain staking ratio, however, remains at 63.2% (approximately 21.2 billion ADA locked), with an annualized return of 4.1%, which is higher than Ethereum’s 3.8%. If the staking ratio rises to 70% (adding an additional 2.6 billion ADA lockup), the drop in circulation could increase the price by 15% to 20% in the short term. Based on Santiment data, the count of whale addresses containing more than 1 million ADA decreased from its 2022 high of 382 to 287 (decreasing by 24.9%), but the top ten staking pools account for 31.5% of the equity, centralizing risks or downplaying the force of volatility.
From a technology development point of view, since the release of Cardano’s Alonzo hard fork, the count of smart contracts increased from 0 to 3,489 in 2023. However, the DeFi locked value (TVL) was only 320 million US dollars, far less than Ethereum’s 21 billion US dollars. If it remains true that current average monthly rate of growth for Dapps stays at 14%, TVL needs to exceed 2 billion US dollars (25% market value) in order to set off a price explosion. It would be in Q2 of 2025 according to a linear estimate. Drawing an analogy with the past data, six months after Ethereum’s TVL reached 1 billion US dollars, its price has appreciated by 380%, while Cardano’s TVL/ market cap ratio of 0.07 was just 46.7% of Ethereum’s ratio of 0.15, i.e., a whopping lag in the ecosystem.
The market cycle model shows that the 90-day price correlation between ADA and Bitcoin is 0.82. If the Bitcoin halving in 2024 repeats the 559% increase seen in 2020, ADA may follow suit and rise to $5.8 (with a potential increase of 2,130%). Glassnode’s MVRV Z-Score measure is currently -0.37 (its all-time low range is -0.5 to -0.3), the same as it was in March 2020. ADA has gained 1,400% during the next 12 months. Nevertheless, it needs to break above the historical resistance level of $3.1, which started a 34% daily selling pressure in September 2021.
Regarding actual-world progress usage, the Atala PRISM project, an alliance between Cardano and Ethiopia, covers 5 million digital student identities. However, to date (as of 2023), merely 12% (600,000 users) have been published, with less than a daily average of 2,000 on-chain actions. For reference, Visa managed a daily average of 470,000 transactions during the Solana stablecoin test, with significant efficiency imbalance. If African government projects (e.g., Rwanda and Tanzania) start on-chain activities with tens of millions of users in 2024, it could stimulate a 300% surge in ADA payment demand, but it would need to break through local fiat currency exchange barriers (only three exchanges currently facilitate ADA/ African fiat currency trades).
In terms of regulatory risks, the US SEC labeled ADA an “unregistered security” in 2023. Delisting by the exchange in case of confirmation of the case will see a 45% decline in liquidity (observe the 78% decline in trading volume once XRP was sued). The Cardano Foundation has, however, incurred 12 million US dollars in compliance. The development of the ABN AMRO cooperation project toward compliance with the EU MiCA regulations stands at 67%, and it is anticipated that the suppression can be removed once full compliance is achieved in 2025. Considering technical, ecological and cyclical considerations, the possible window of the when will cardano explode could be from the last quarter of 2024 to mid-2025. The breakthrough conditions are TVL greater than 2 billion US dollars, Bitcoin crossing 100,000 US dollars and compliance clarification.