With the market's total valuation down 47% (to $1.15 trillion) year to date, investors might be losing patience with crypto. But with sentiment near rock-bottom and macroeconomic headwinds like inflation cooling (crypto hasn't proven to be a hedge against inflation), now might be the time to bet on a rebound. Cardano's (ADA 0.24%) technical advantages and ambitious upgrades could make it a solid pick.
Cardano has advantages over its peers
Like most asset classes, cryptocurrency prices tend to move in tandem with each other in the near term. They are all influenced by the same macroeconomic factors like inflation and Federal Reserve policy, which impacts investor risk tolerance and the amount of capital available to put in the market. However, over the long term, some assets dramatically outclass their peers.
Soaring over 3,000% from its 2017 launch to become the seventh-largest cryptocurrency with a market cap of $18.4 billion, Cardano is one of the industry's top performers. And this trend is likely due to its technical advantages and effective branding.
Unlike the current market leader, Bitcoin, Cardano is programmable. On top of serving as a way to store and transmit value, it also allows users to create self-executing programs called decentralized applications (dApps), which offer services such as asset exchanges and art markets on the network. And while dApp platforms are not uncommon, Cardano's team sets itself apart through real-world partnerships -- such as a 2021 deal with the government of Ethiopia to create a blockchain-based national ID system. The platform's aggressive development roadmap is also a massive edge.
The Vasil Update Could Help Cement Cardano's Lead
Cardano's developer, Input Output Hong Kong, IOHK, has taken a phased approach to the platform's development. Instead of rushing to lead the market, the platform upgrades itself gradually through a series of "eras." The first three eras (Byron, Shelley, and Goguen) launched Cardano, implemented its proof-of-stake consensus mechanism, and enabled dApps. The current era, Basho, focuses on scalability.
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As part of the Basho era, Cardano plans to launch a hard fork called Vasil. Hard forks are drastic changes on a blockchain that require it to split into two separate chains because it is no longer backward compatible. Vasil aims to improve Cardano by reducing the cost of transactions by lowering their size. The change was scheduled to go live in June but has been delayed for for additional testing. When it goes live, Vasil will be the latest in a series of ongoing updates that will help keep Cardano relevant in the face of stiff competition.
Over the longer term, Cardano's developers are looking at another update called Hydra, which could theoretically boost the blockchain's transaction capacity from 250 per second to 1,000,000. But the team stresses that this is an aspirational target, not a firm projection.
Betting on the crypto rebound
Sometimes it pays to be greedy when others are fearful. And with the cryptocurrency market down by almost half this year, fear is the dominant emotional right now. While investors may want to wait for more positive macroeconomic data before jumping back into the market, Cardano looks like a great way to bet on a crypto rebound because of its technical advantages and active development.
