During the past 12 months, Cardano's (ADA 1.32%) price declined about 13% as Bitcoin (BTC 0.03%) and Ethereum (ETH +0.32%) rose 9% and 2%, respectively. It's still the world's 10th most valuable cryptocurrency with a market cap of about $18 billion, but it struggled even as lower interest rates generated tailwinds for the broader crypto market.
Cardano also remains more than 80% below its all-time high, even as Bitcoin and Ethereum set fresh all-time highs earlier this year (though they have declined in recent weeks). But even though the bulls are shunning Cardano, I believe this underappreciated token could double to $1 within the next year.
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Why does Cardano have room to grow?
Cardano was created by Ethereum co-founder Charles Hoskinson. Like Ethereum, Cardano uses the proof of stake (PoS) consensus mechanism to validate its transactions instead of the proof of work (PoW) mechanism used to mine Bitcoin. PoS tokens can't be mined, but they can be staked to earn more coins as interest-like rewards. PoS blockchains also support smart contracts, which are used to create decentralized apps (dApps) and other crypto assets.
Unlike other tokens that are minted on Ethereum's blockchain, Cardano minted its coins on its own proprietary PoS blockchain protocol called Ouroboros. Cardano added staking features to its blockchain in 2020 and support for smart contracts in 2021. Its projects are also approved with formal peer reviews to ensure their scalability and security. Ethereum and other PoS blockchains don't use formal reviews to greenlight every single project.
Cardano is often valued by the speed and growth of its developer ecosystem. On its own, its Layer-1 (L1) blockchain can achieve speeds of 250 transactions per second (TPS), compared to Ethereum's average L1 speed of just 15 to 30 TPS. Cardano can achieve even higher speeds of about 1,000 TPS with its Layer-2 (L2) Hydra "heads," which process more of its transactions off-chain so they don't congest its L1 blockchain. Ethereum's developers also bundle together their transactions in a similar manner with its L2 rollups.
Cardano has a circulating supply of about 36 billion tokens with a fixed maximum supply of 45 billion tokens. Ethereum doesn't have a maximum supply. Therefore, Cardano can also be valued by its scarcity like Bitcoin -- which has a maximum supply of 21 million tokens.
CRYPTO: ADA
Key Data Points
What catalysts could drive Cardano's price to $1?
More than 70% of Cardano's circulating supply is already staked, which means less than 30% of those tokens are available for trading. If more investors buy Cardano and stake their tokens, its supply will drop further and drive up its price. Several catalysts could spark that long-overdue rally.
First and foremost, its developer ecosystem needs to expand. It doesn't serve as many developers as Ethereum, the world's leading blockchain for building new dApps and other crypto projects. But its L1 blockchain is faster and its charges fixed transaction fees, which are often cheaper than Ethereum's surge pricing gas (user) fees when the network is congested.
Meanwhile, the expansion of its hydra heads should further boost its speed, improve its scalability, and help it compete more effectively against Solana (SOL 0.35%) -- another popular PoS blockchain which processes its transactions much faster than Ethereum and Cardano.
Solana has two main weaknesses: Its network suffers frequent outages, and it has high hardware requirements. Since Solana runs on more powerful hardware, it's more centralized than decentralized blockchains like Ethereum and Cardano, which can validate transactions across a broader range of less powerful devices.
So, as Cardano upgrades and expands this ecosystem, it could attract more developers. Those developers would launch more dApps that support Cardano's token, and its price would stabilize and rise. As that happens, the market's demand could outweigh its tight supply of unstaked tokens -- and its price could finally soar to fresh highs. Even if its price doubles to $1, though, its market cap would only rise to $36 billion.
Cardano could also loosen its rigid peer-reviewed approval process to attract more developers, and some crypto firms could try to launch their own spot price exchange-traded funds (ETFs) for the token. Moreover, further interest rate cuts -- which could finally reduce those stubbornly high Treasury yields -- would drive more investors back toward the smaller cryptocurrencies like Cardano.
Cardano's price could remain volatile, but it clearly has a shot at hitting $1 during the next 12 months as those tailwinds kick in. It might not attract as much attention as Bitcoin and Ethereum, but investors shouldn't toss it out with the weaker meme coins, which don't have as many long-term catalysts.
