Cardano (ADA 4.67%) minted some millionaires after its market debut. The cryptocurrency started trading at $0.025 in 2017 and surged to a record high of $3.09 in 2021. That rally would have turned a $10,000 investment into $1.24 million.
Cardano attracted a lot of attention because its blockchain processed transactions at a faster rate than Ethereum (ETH 1.20%). Like Ethereum, Cardano was a proof of stake (PoS) blockchain that supported smart contracts for creating decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. Cardano also set its fees by the size and computing power of each transaction, which made its pricing more predictable than Ethereum's congestion-based gas fees.
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But today, Cardano's token trades at about $0.40. That $1.24 million investment at its peak would only be worth about $160,000 today. It lost its luster as Solana (SOL 3.46%) overtook its transaction speeds on its PoS blockchain, while the broader crypto market fizzled out as rising rates drove investors toward more conservative investments. Cardano also struggled to shake off its reputation as a meme coin that was less reliable than "blue chip" coins like Bitcoin (BTC 0.83%) and Ether. But could this token bounce back and generate more millionaire-maker gains in the future?
What's next for Cardano?
Cardano's biggest near-term catalyst is a network upgrade called the "Chang Hard Fork," which is scheduled to occur on Aug. 27. That update is expected to increase its blockchain's speed, bolster its security measures, and improve its scalability. It will also mark its final step toward becoming a fully decentralized network.
Those upgrades might make Cardano more appealing to developers, but it probably won't come close to matching Solana's higher speeds and lower fees. Cardano has a theoretical max speed of 1,000 transactions per second (TPS), while Solana has a theoretical max speed of 65,000 TPS. Solana accomplishes this by enhancing its PoS blockchain with its own proprietary proof of history (PoH) mechanism. But both blockchains have also been accused of inflating their max speeds.
Justin Bons, the founder and CIO of the European crypto fund Cyber Capital, recently called Cardano and Solana the "two biggest poster children for fake TPS metrics." Bons claims Cardano and Solana only have "real" max theoretical speeds of 18 TPS and 739 TPS, respectively. For reference, Ethereum has a theoretical max speed of 119 TPS, so Cardano probably isn't the "Ethereum killer" some investors had expected it to be.
CRYPTO: ADA
Key Data Points
On the bright side, a recent report by Santiment indicates Cardano's development activity has soared over the past few months and is actually growing at a faster rate than Ethereum. Therefore, the stabilizing crypto market, expectations for lower interest rates, and high hopes for the Chang Hard Fork might be bringing developers back to Cardano.
Another potential catalyst is the U.S. Securities and Exchange Commission's (SEC) recent decision to pause its allegations that Cardano, Solana, and Polygon were unregistered securities in its lawsuit against Binance. Those allegations previously drove Robinhood and other platforms to delist the three tokens in the U.S., but they might relist them if the SEC backs off.
Lastly, the approvals of the first spot price ETFs for Ether earlier this year might clear the way for similar ETFs for smaller PoS tokens like Cardano. Any serious buzz about a spot price ETF for Cardano could drive its price higher.
Could Cardano still generate millionaire-making gains?
Cardano is now the world's fourth largest PoS token with a market cap of $14 billion, but it's still tiny compared to Ether's $332 billion market cap. The main challenges for Cardano are existential -- its network isn't fast enough, its fees aren't that competitive, and it simply isn't attracting enough attention from developers and investors. As for staking Cardano to generate passive income, its current staking reward of 1.9% is also anemic compared to risk-free CDs or T-bills.
Some bullish investors believe Cardano could experience a technical rebound to about $3 as interest rates decline and investors warm up to cryptocurrencies again, but I think that's wishful thinking. Cardano was driven above $3 during the buying frenzy in meme stocks and meme coins in 2021, but investors will likely become more selective this time as the crypto market finally stabilizes. When that happens, Cardano probably won't attract as much attention as Bitcoin, Ether, and the other bigger tokens -- and investors shouldn't expect it to generate millionaire-making gains over the next few years.
