This year has been a difficult one for investors, as the S&P 500 is down almost 19%. The market for cryptocurrencies has fared worse, going from a peak of nearly $3 trillion in November last year to a current value of about $1 trillion. Aggressive tightening by the Federal Reserve in response to soaring inflation has caused investors to flee risky assets.
Amid the market turmoil, there is a popular cryptocurrency network that warrants attention despite falling prices. Known as an "Ethereum killer," Cardano (ADA 0.66%) promises to solve some key issues around speed and scalability. The price of ADA, its native token, has dropped about 85% from its peak, creating a potential buying opportunity.
Is a turnaround likely? Let's take a closer look at what Cardano is and if it can hit $1 per token in the future.
CRYPTO: ADA
Key Data Points
What is Cardano?
Compared to the more than 20,000 various cryptocurrencies out there today, Cardano stands out from the crowd. It was founded by Charles Hoskinson, who also helped create Ethereum. The network promises security, stability, and environmental sustainability. As of this writing, Cardano was the eighth most valuable cryptocurrency with a market capitalization of about $16 billion.
Bitcoin operates with a proof-of-work consensus mechanism, where so-called miners deploy massive amounts of computational power to run mathematical puzzles in order to verify transactions and earn new Bitcoin. Cardano, on the other hand, is like Ethereum plans to be after an upgrade. It uses a proof-of-stake (PoS) system called Ouroboros to add blocks to the blockchain. PoS means that owners of ADA can lock up their tokens, or stake them, to verify new transactions. In return, they receive rewards in the form of new tokens.
What's more, Cardano's development process is very calculated and deliberate. New features are added in phases, with five in total. Upgrades are thoroughly researched and peer-reviewed, leaning on a team of computer scientists and cryptographers at top universities all over the world to provide guidance and analysis.
Cardano's fourth and current development phase, known as Basho, introduces sidechains. This means that there will be new blockchains running parallel to the main network, which can reduce congestion, lower fees, and increase speed. Think of a highway with more lanes allowing a greater number of cars to get through. Because this update, along with a Layer-2 solution known as Hydra, can theoretically help the network process 2 million transactions per second, it substantially increases Cardano's potential in the world of decentralized applications (dApps).
Cardano's use cases
Ethereum, with its ecosystem of nearly 3,000 dApps and its 24-hour volume of $54 million, is in pole position when it comes to the most popular smart-contract networks. But Cardano is not far behind. The ecosystem consists of over 1,000 different dApps today.
Even in more tangible real-world settings, Cardano shows promise at making an impact on an enterprise level. For example, in the healthcare sector, Cardano's technology is helping to reduce the sale of counterfeit pharmaceuticals. In government and financial services, identify verification is an area of focus. And in agriculture, using Cardano's tools to help track where food is going through the supply chain can be helpful for farmers.
In my opinion, the most important indicator of a cryptocurrency's staying power is its ability to introduce real use cases. Cardano is showing promise in this regard.
Is a $1 price target likely?
In September 2021, the price of ADA hit an all-time high of $3.10 per token. Therefore, hitting $1, which would be a 106% rise from the current price of $0.48, is very possible. And at that level, Cardano's total market cap would be $34 billion. A crazy crypto bull run like what happened in 2021 can't be something investors should always bank on, but a $1 price target is certainly likely for those who practice patience.
Despite the recent rout in the cryptocurrency market, an uncertain period in which many digital assets will likely become worthless, Cardano's development structure, unique characteristics, and potential for real-world use cases increase its chances of survival. Therefore, I think it's definitely in the realm of possibility that ADA will one day eclipse $1 again.
