During the first four months of 2023, Cardano (CRYPTO: ADA) seemed to be on a roll, up more than 80% at one point. But things have turned south in a major way recently, with the price of Cardano dropping more than 20% over the past week. Cardano is now down almost 30% over the past 30 days and trades for just $0.26.
Against this backdrop, it's fair to ask: Can Cardano ever regain a $1 price? If Cardano is going to rise fourfold in price, then a lot obviously has to go right. Here's a closer look at three key factors.
Cardano vs. the SEC
First and most importantly, Cardano needs to get a handle on potential regulatory action that could be coming from the Securities and Exchange Commission. At the beginning of June, the SEC named Cardano as one of the unregistered securities that cryptocurrency exchanges Binance (CRYPTO: BNB) and Coinbase (COIN +4.41%) were offering for sale to customers. And since then, the price of Cardano has taken a nosedive. Cardano rarely has the types of volatile single-day price swings associated with other cryptocurrencies, but in the span of just 24 hours, the price of Cardano cratered by 20%.
It's important to emphasize here that the SEC is not yet going after Cardano directly. That said, Cardano has almost zero chance of reaching $1 again if it can't regain the trust of investors, who are understandably concerned about potential SEC regulatory action.
Image source: Getty Images.
And that might explain why Cardano has been taking steps to ensure that both investors and regulators view it as a crypto token, not a security.
A big step in this direction earlier this year was the launch of Voltaire, the final step in the developmental roadmap of Cardano. Voltaire calls for more decentralization and better blockchain governance, which is one way to avoid getting the "security" tag. And just last week, Cardano provided more details about organizational changes coming to Input Output Global (IOG), the company that has led the development of the Cardano blockchain since 2017.
The macroeconomic outlook
Compounding Cardano's challenges is the U.S. macroeconomic outlook. While the Federal Reserve has paused its interest rate hikes, it also signaled that this hiatus is not likely to last. And that has definitely spooked the crypto market. Cardano was one of the worst-hit altcoins, dropping 5% on the news.
The current market outlook suggests that until Bitcoin recovers, Cardano won't either. Put another way, Bitcoin is going to be leading the market lower or higher, and Cardano will be along for the ride. So, again, it's unlikely that Cardano can buck the trend and head higher if Bitcoin is still trading in the $25,000 to $30,000 range by the end of the year.
Is this the bottom for Cardano?
The good news is that the underlying fundamentals at Cardano are actually better than they have been in some time. That explains why Cardano was up 80% earlier this year -- investors saw the real, tangible efforts being made to boost the long-term growth prospects of the blockchain.
A good example here involves decentralized finance (DeFi), an important sector of the blockchain world where Cardano has historically lagged behind market leaders like Ethereum (CRYPTO: ETH). That seemed to change at the start of 2023, with Cardano rolling out new DeFi initiatives. At the same time, key metrics used to measure DeFi strength (such as total value locked, or TVL) started spiking to new highs. Just this month, for example, Cardano's TVL hit the $125 million level, which is the equivalent of 500 million Cardano tokens.
Based on this, investors have to be hoping that Cardano has hit rock bottom, and that there's no way to go but up in the second half of 2023. Yes, the regulatory outlook for Cardano is unsettling right now. And, yes, the broader macroeconomic situation shows few signs of improving over the next quarter or two.
But if you look below the surface, the latest quarterly numbers from Cardano look promising. There's growth in non-fungible tokens (NFTs), there's growth in DeFi, and overall transaction volume is taking off.
At some point, Cardano is going to break through the $1 mark. Cardano is now trading at 92% below its all-time high of $3.10, and is clearly in bargain-basement territory for any brave value investors out there. I'm mixed on Cardano in the short and medium run, but still bullish on Cardano over the long haul.
