Cardano (ADA 1.31%) is a crypto project that's easy to respect intellectually thanks to its commitments to academic-style collaboration and rigor, and yet hard to justify as an investment. Although its design doesn't particularly excel at any specific task, its community remains fiercely loyal.
But investing isn't the place to get sentimental. If you want your capital to compound with crypto, you need the chain you own to be a place where people already park value, borrow against it, and move it around such that real economic value is created. And that's why there are at least three reasons it's probably for the best to sell Cardano and buy one of its competitors like Ethereum (ETH 0.96%) or XRP (XRP 1.87%) instead.
Image source: Getty Images.
1. Cardano still has not found a product-market fit
Stablecoins are tokens designed to track a fiat currency like the U.S. dollar or other store of value, so they function like on-chain cash, and, as we all have heard, cash is king. On Cardano, the total stablecoin market cap is about $34 million. That's not zero, but for heavy-duty financial applications, it's minimal, and it's also too shallow for a teeming decentralized finance (DeFi) ecosystem to flourish.
On Ethereum, stablecoins total $159 billion. It's no surprise why it's the center of the DeFi universe; it has the most stablecoin fuel in the entire crypto sector by far. Meanwhile, XRP has $416 million in stablecoins.
CRYPTO: ADA
Key Data Points
You can observe the same gap in usage.
Cardano processes about 2,100 transactions per hour at a pace of roughly 0.6 transactions per second (TPS) as of Feb. 25. Ethereum processes about 84,000 transactions per hour at roughly 23 TPS -- and that's a result of a couple of years dedicated to upgrading its throughput, with two additional upgrades on the way this year.
For its part, XRP operates at 21 TPS. And for the record, both XRP and Ethereum offer cheaper transaction fees than Cardano does.
So Cardano doesn't seem to have the features that capital is looking for. That's a big reason to sell it.
2. Ethereum has the capital it needs
Ethereum's biggest advantage is not speed, though it's faster than Cardano. Its edge is that it already settles a large share of on-chain finance, particularly in DeFi, and liquidity tends to attract more liquidity.
That liquidity thus probably won't flow to smaller, slower platforms.
CRYPTO: ETH
Key Data Points
Ethereum's DeFi total value locked (TVL) is $55.5 billion. Cardano has just $133 million. And XRP -- which as a chain explicitly targets centralized financial operators, and does not provision much of any of its feature set toward DeFi -- has TVL of just over $50 million. So it isn't even trying to compete in the segment whatsoever, unlike Cardano, and it still managed to attract some capital.
That argues against Cardano's inclusion in a crypto portfolio.
3. XRP will win with institutions
The XRP Ledger (XRPL) is optimized for moving value and for supporting token issuance, both of which are tasks that financial institutions need to perform in an environment that complies with financial regulations. Whereas Cardano has little in the way of regulatory compliance features, and seemingly none planned for future development, XRP has plenty, and that means it's much more likely for it to win its target market.
CRYPTO: XRP
Key Data Points
For example, the XRPL's multipurpose tokens (MPT) feature for tokenized asset management natively includes compliance controls like freezing balances or clawing back tokens, and there are plans to add a substantial suite of additional identity verification features to its compliance tooling. So it has the pieces in place to attract capital already, and so there's no real chance of that same capital deciding to flow to a less hospitable environment on Cardano.
Thus there's one less market where that coin has high odds of success, which is another reason to sell it.
