For the first four months of the year, Cardano (CRYPTO: ADA) was on a roll. It was not only keeping up with Ethereum (CRYPTO: ETH), it was also keeping up with Bitcoin (CRYPTO: BTC). By mid-April, Cardano was up nearly 80% for the year, and a true breakout seemed to be right around the corner. In late May, Cardano's founder even talked up the potential for a "Cardano summer."
But if you're expecting Cardano to take off this summer, it's time to recalibrate expectations. The paths of Cardano and Ethereum are now diverging. Year to date, Cardano is now up only 5%, while Ethereum is still up nearly 56%. If given a choice between Cardano and Ethereum, the clear winner now is Ethereum.
The SEC vs. Cardano
Quite simply, the Securities and Exchange Commission ruined Cardano's summer. In early June, the SEC filed lawsuits against two major cryptocurrency exchanges, Binance and Coinbase Global. In the lawsuits, the SEC specifically mentioned that it considered Cardano to be one of the unregistered securities that these exchanges were offering to customers. As might be expected, that set off shock waves in the crypto industry. In a span of just a week, Cardano plunged 30%.
So if you're thinking of buying Cardano, you need to understand this elevated regulatory risk. Until the regulatory issues are resolved, the crypto might have a very difficult time regaining investors' trust. In comparison, Ethereum has remained in the good graces of regulators so far. While there have been rumblings about the SEC going after Ethereum too, it has not happened yet. So purely in terms of regulatory risk, Ethereum is the safer investment.
Where can Cardano challenge Ethereum?
It's time to take a closer look at Cardano's progress in two key areas of the blockchain market: non-fungible tokens (NFTs) and decentralized finance (DeFi). Both of these have been cited as reasons for Cardano's early-year bull run. When it came to NFTs, it looked like Cardano was closing the gap with Ethereum. And when it came to DeFi, Cardano was finally starting to make a splash after being a non-player for years.
Image source: Getty Images.
However, I'm no longer convinced that Cardano is making any real progress when it comes to NFTs. If anything, Bitcoin has stolen the limelight with its recent introduction of Bitcoin Ordinals. On the DappRadar website, which tracks NFT sales volume, Cardano only has two NFT collections in the Top 20. Ethereum, though, has 18 collections in the Top 20.
With DeFi, the progress has been much more evident, and Cardano deserves a lot of credit here. Out of nowhere, Cardano is now among the Top 20 blockchains in total value locked (TVL), an essential metric for measuring overall DeFi strength. And Cardano has unveiled a number of new DeFi innovations, including a stablecoin, which are setting the stage for long-term growth.
However, Ethereum still towers over Cardano when it comes to TVL, and it's not even close. Ethereum ranks No. 1, with $24.5 billion in TVL, while Cardano ranks No. 19, with just $135.9 million in TVL. So, while Cardano has made a lot of progress on the DeFi front, it's still a long way from challenging Ethereum.
Ethereum is the better buy
The case against Ethereum, of course, is that its best days are behind it. When it launched in July 2015, it stood alone as a blockchain network with smart contract functionality. And it was nearly unchallenged in unveiling new innovations, such as NFTs and decentralized exchanges. But that's no longer the case. There are plenty of potential "Ethereum-killers" out there, among them Cardano. So investors can no longer expect the extraordinary returns that Ethereum has delivered in the past. There's just too much competition.
But it's hard to argue with Ethereum's track record, or with its commitment to its future development. Ethereum co-founder Vitalik Buterin continues to provide very promising guidance about what to expect after last year's network upgrade known as The Merge, and it's clear that Ethereum is fully committed to being a best-in-class blockchain for years to come. The next seven years might not be as extraordinary as the first seven years, but in 2030, you could look back in regret if you decide to buy Cardano and not Ethereum right now.
