When taking a cursory look at the basic stats for Cardano (CCC:ADA-USD), it’s hard not to get excited about its prospects. First and foremost, social media dominates market discourse. And under this new paradigm, an undervalued asset equates to a cheap per-unit price. While ADA is no longer a penny crypto, so to speak, it’s still inexpensive at under $2.
We’ll see how long this lasts. But in the nearer term, I can clearly see a case for Cardano moving substantially higher. I’m not going to give a price target, although a doubling from the time of writing price (around $1.60) is possible. Primarily, I say this because we’re in a feeding frenzy of upside panic.
For instance, I never thought in my wildest dreams that Dogecoin (CCC:DOGE-USD), the biggest pile of garbage I can think of, would be ranked as the fourth most valuable cryptocurrency. Look, I don’t mean to sound dismissive but Dogecoin started off as a joke. Ironically, DOGE was satire, meant to criticize the wild proliferation of junk coins.
Life imitates art, I suppose.
But perhaps because investors recognize the potential frailty of DOGE’s rally, they’ve bid up Cardano. Sure, ADA carries the elements of speculation. Notably, you have legendary rocker Gene Simmons of Kiss fame buying $300,000 worth of the crypto coin.
But the critical factor is that Cardano levers utility. According to its website, it’s the first proof-of-stake blockchain platform “to be founded on peer-reviewed research and developed through evidence-based methods.” As you likely know, Ethereum (CCC:ETH-USD) has been making noise for its concerted efforts to shift to a PoS protocol. At least by what I see on Cardano’s website, it beat Ethereum to the punch.
But is a cheap price and some utilitarian bragging rights enough to justify a position in ADA? This is where the matter gets tricky.
Be Careful What You Wish for with Cardano
Our own William White has been tracking the craziness that is the crypto sector. Recently, he put Cardano on his radar, compiling various analysts’ opinions regarding ADA and its possible future trajectory. One take caught my eye because of its seemingly ridiculous target.
According to Coinpedia contributor Sahana Vibhute, there’s apparently a case to be made for Cardano at $10. And not many years down the line but only several months. By the end of 2021, ADA could hit the double-digit threshold. And by the end of 2022, we could be looking at $22 per each unit.
That’s not the craziest target as according to the article, Cardano could see a $100 price tag by end of 2027.
I don’t know about $100 ADA coins but surprisingly, the $10 forecast isn’t exactly out of reach. From where I stand, such a return would imply a market capitalization of approximately $320 billion. For context, the market cap of Ethereum is currently $473 billion.
At the moment, this sounds unreasonable but it’s only so if the other cryptos’ market value remains static. However, for Cardano to leapfrog to a $300 billion-plus valuation, it strongly implies that sector leader Bitcoin (CCC:BTC-USD) will lose substantial market share or Bitcoin dominance in crypto parlance.
Prior to the last crypto rally in 2017, BTC dominance frequently ranged between 80% to 90%. But as the rally gained serious momentum, BTC dominance slipped to between 40% to 60%. In other words, as investors bought up the cheaper altcoins, it came at the expense of Bitcoin’s market share.
That tells me that extreme crypto rallies are not wholly accretive. Although I can’t prove it, I’m almost certain that investors are selling BTC to jump into altcoins like Cardano. That’s good for ADA temporarily but not for the health of the overall crypto market.
$10 ADA Might Mean $30,000 Bitcoin
As you know, the difference between the current rally and the prior one is the institutional investor. Namely, more of Wall Street’s alpha dogs are moving into Bitcoin. But they’re arriving at the party late compared to crypto advocates, who have been piling in at much lower prices.
Therefore, if we see a rotation out of Bitcoin to Cardano and other altcoins, the BTC price will suffer. If BTC suffers too much, though, it might trigger the institutional players’ stop-loss or stop-limit orders. That could send the entire crypto market falling.
So yes, it’s possible to see ADA at $10 or even higher. But you might want to consider what that might imply before you get too excited.
On the date of publication, Josh Enomoto held a long position in ADA, DOGE, ETH and BTC.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.