Earlier this year, it looked like Cardano (CRYPTO: ADA) might be headed for a major breakout. However, Cardano is now down nearly 20% from its 2023 peak and is officially in "dip" territory. Cardano is currently trading at just $0.37.
That's both good and bad news. It's bad news because Cardano is obviously having a very difficult time breaking through the $1 price level. However, it's good news because this dip could represent a cheap buying opportunity for crypto investors. Let's take a closer look at three big reasons to be optimistic about Cardano.
DeFi metrics
At the beginning of 2023, one of the key priorities for Cardano was the development of its presence in the decentralized finance (DeFi) space, an area where it has historically lagged blockchains such as Ethereum (CRYPTO: ETH). So far, it looks like Cardano is delivering on this strategy: New decentralized exchanges are emerging; a new stablecoin project just launched; and new DeFi innovations continue to appear with surprising regularity.
Image source: Getty Images.
All of that increased DeFi activity is starting to show up in the numbers. Total value locked (TVL), which is a metric that investors use to track how much activity is really taking place on a blockchain, is soaring. TVL for Cardano is now at a 10-month high, and there's finally room for optimism that Cardano can start to climb the TVL charts, where it currently ranks 18th among all blockchains. Breaking into the top 10 would be a clear signal that Cardano has finally arrived as a player within the DeFi space.
New blockchain improvements
Cardano has always had one of the most detailed roadmaps for development of any of the major blockchain projects. And Cardano is showing no signs of letting up now. In September 2022, Cardano completed a major update, and this year, Cardano is moving ahead with its new "Voltaire" phase of blockchain development. This new phase will focus on the governance of the Cardano blockchain, making it more efficient when it comes to activities such as staking and validation.
But the real blockchain improvement that is capturing the attention of the crypto community is Cardano's recent "Hydra" launch. Hydra is a Layer 2 scaling solution that is designed to make Cardano run faster, better, and more efficiently. That has immediate appeal to users and developers.
Scaling solutions might sound rather mundane and boring to the casual investor, but here is the number you need to know: 1 million, as in 1 million transactions per second. Cardano developers are now confident that they can get the blockchain to 1 million transactions per second with Hydra. This mythical goal has been something that Ethereum has long promised but never delivered, so this would be a huge win for Cardano.
Crypto whales are buying Cardano
Finally, crypto whales are buying Cardano hand over fist. Due to the transparency of blockchain technology, it is possible to track which blockchain wallets are actively buying or selling Cardano. Right now, it looks like whales -- that is, the investors with the largest crypto holdings -- are turning positive on Cardano.
From my perspective, whale activity can be a very useful leading indicator. By way of comparison to the equity markets, it's similar to a large, well-known value investor snapping up shares of a particular stock that appears to be undervalued. It's something that makes you sit up and take notice. The only problem is that in the crypto world, we usually don't know the exact identity of who is holding these blockchain wallets.
Is Cardano a buy?
Of course, Cardano seems to disappoint investors on a regular basis, and this could be the case yet again. The pace of blockchain development of Cardano can seem agonizingly slow for crypto investors clamoring for overnight, 100 times returns. And investors have continually complained for years that the Cardano blockchain is a "ghost chain" where nothing really happens.
But I think these concerns are no longer as valid as they once were. First, as noted above, Cardano is finally making a big push into DeFi, which is one of the most important sectors of the blockchain world. Second, Cardano is continually upgrading and improving its blockchain. With the new Hydra update, users and developers should be able to see immediate results: much faster transaction-processing speeds and lower fees.
So, yes, buy the dip, as long as you take a long-term perspective and don't expect a rocket ship to the moon within days, weeks, or months. In my view, Cardano is a strong, long-term buy.
