A 42% haircut over just 90 days can make almost any cryptocurrency look like a bargain, at least on the surface. But with Cardano (ADA +1.36%), it's necessary to probe a bit deeper before making a purchase with $1,000 -- despite it being a favorite coin of yesteryear.
After all, it's entirely possible for a chain like this one to have a price that's low for a reason. Let's dive in and determine if there's any meat left on the bone here.
Image source: Getty Images.
The coin being priced cheaply doesn't fix its core problem
A blockchain's value is determined by the economic activity it hosts, the fees it generates, and the capital it attracts. By those measures, Cardano simply isn't positioned well today, nor is it well-positioned for the future.
The chain's total value locked (TVL), which measures the capital held in its decentralized finance (DeFi) protocols, is roughly $141 million. In the grand scheme of things, Cardano's TVL is smaller than that of many chains, which most investors -- including yours truly -- have never even heard of. That makes it an unlikely place to be the next decentralized finance boom.
CRYPTO: ADA
Key Data Points
Worse yet, Cardano retained just $270 in chain revenue from the $1,350 in transaction fees it incurred during the 24-hour period ending at 9 a.m. on March 8. For the sake of comparison, Ethereum brought in $77,095 in chain revenue in the same period. Similarly, Cardano's daily active wallet addresses tend to fluctuate between 30,000 and 40,000, versus roughly 700,000 for Ethereum.
What's causing Cardano to lag so much? In short, it's a smart contract platform in an ocean of others, including Ethereum. Whatever unique features it's offering to developers or to users with capital, on average, they aren't enough to get people to take the bait and build applications on the chain.
Don't pay the patience tax
It's still technically possible for Cardano to develop a new set of features that make it an appealing place for the capital, users, and developers that it presently lacks.
But its development roadmap doesn't really include anything of sufficient scale or impact on that front. The features in development, like better scaling capabilities and a privacy-oriented partner chain, would be a lot more useful if there was already some capital or meaningful economic activity happening.
Nonetheless, there might be some investors who are inclined to take a position worth $1,000 in Cardano right now, with the idea being that it's the best time to buy, as it's priced so cheaply that it probably won't experience more downside. This would in turn make it more comfortable to hold for a long period of time in hopes of its fortunes improving.
But don't do that. Hope isn't a strategy.
While there might be a compelling reason to invest in Cardano in the future, as of right now it doesn't offer much.
