Cardano (CCC:ADA-USD) has done exceedingly well this year, despite falling over 34% from its peak of $2.3091 on May 15 to $1.52 on June 16. It ended 2020 at 17.53 cents, so Cardona’s rise so far in 2021 is a gain of 768%.
That is very impressive, but I feel that the crypto, given its popularity, has a good chance of reaching its previous peak.
Here are some of the reasons why this will happen.
Cardano’s Special Features
Cardano is a smart contract platform that focuses on competing with similar platforms such as Ethereum (CCC:ETH-USD). It is seen as a third-generation cryptocurrency, as it does not use proof-of-work (POW) to validate its blockchain transactions. In other words, unlike Bitcoin (CCC:BTC-USD) and Ethereum, it does not require hash mining to clear its transactions.
Cardano’s proof-of-stake (POS) system is where Ethereum is headed, as I have pointed out in another article recently. Cardano’s system, called Ouroboros, is based on a proof-of-stake validation. It does not use anywhere near the level of electricity that digital mining does.
Recently Cardano started launching smart contracts, according to Decrypt.co online magazine. It was initiated by Input Output Hong Kong (IOHK), a company launched by Charles Hoskinson (one of Cardano’s founders) to do Cardano blockchain R&D. This was part of a “testnet” upgrade for the Cardano blockchain (“Alonzo”).
The significance of this is that this will eventually lead to the development of new decentralized applications (Dapps). This could also lead to decentralized finance (DeFi) apps, which have started to take the crypto world by storm. For example, The Wall Street Journal recently wrote that the Defi phenomenon is “helping to fuel the crypto market boom.” Here is how popular they are, according to the WSJ: “Assets deposited as collateral on DeFi platforms, a measure known as total value locked, have grown to more than $100 billion, of which about $64 billion is on Ethereum.”
Where This Leaves Cardano Crypto
The sponsors of Cardano (mainly the Cardano Foundation) and IOHK, want to allow Cardano Dapps to get in on this huge market. Cardano is clearly playing catchup here, but the sponsors intend to catch up.
For example, the Cardano Foundation, based in Zurich, recently hired its first CEO, Frederik Gregaard, in September 2020. This was to spearhead the smart contract “Goguen” rollout effort.
The bottom line is that if its smart contract usage takes off, the number of Cardano transactions will rise dramatically. That will only serve to push the ADA token price higher as well.
Right now Cardano is the world’s fifth-largest cryptocurrency by market capitalization, according to Coinmarketcap.com. It presently has a market value of $48.69 billion. This puts it two crypto standings behind Ethereum, which has a market cap of $282 billion, as of June 16.
In a September 2020 interview, Charles Hoskinson said his vision is to make it “a ‘global financial operating system’.” It will be able to easily scale up as new addresses are added with the launch of its smart contract capability.
According to a report earlier this year, Cardano hit an all-time high in terms of active wallet addresses and the number of transactions per day. This was updated by another report in March that said that Cardano now has over 500,000 unique wallet addresses, growing quickly. Compare this to Ethereum, which had 660,000 unique addresses, as of May 16, according to Glassnode.com.
In other words, even though Ethereum has a market value that is more than 5 times greater than Cardano (i.e., $248 billion vs. $48 billion), its address count is only 20% greater (i.e. 600,000 vs. 500,000). This implies that Cardano should be much higher than $48 billion right now. This is a major reason why I see the Cardano crypto price doubling over the coming year, especially as its smart contract usage rises.
On the date of publication, Mark R. Hake owned long positions in Bitcoin and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.