As I consistently stated over the past year, I believe that the big winners in the cryptocurrency sweepstakes will be those that provide the most utility. As I’ve also noted, I view Cardano as a leading candidate because of this.
As CEO of Input Output Hong Kong (IOHK), Hoskinson has a job to do, not making people money. If they make money due to their belief in what Cardano and IOHK are doing, that’s great, but it’s not why the blockchain visionary gets up in the morning.
He’s in it to change the world for the better. As long as Hoskinson and company stick to their North Star and fundamentals, Cardano will do just fine.
Cardano Falls on Hard Times
Over the past three months, ADA-USD has lost 44% of its value. At this writing it’s at $1.57. Its market capitalization of $52.4 billion makes it the sixth-largest cryptocurrency. As recently as August, it was the third-largest.
These things happen, Hoskinson reckons.
“Old-school people like me say you have to have real fundamentals, real transactions, real commerce, a potential for user utility, a path to these things and a view of how these things are going to work in the world, change the world,” The Daily Hodl reported Hoskinson stating on YouTube.
I couldn’t agree more.
By focusing exclusively on Cardano’s essential utility, I see it landing on the winning side of history. But not without a whole lot of volatility.
What it’s doing in Ethiopia to create an efficient digital identity system for the five million students in the country as part of the Atala Prism project is inspirational. I’m confident Cardano will be successful in this endeavor.
“The important thing is that Hoskinson and the rest of the IOHK team continue to think about the bigger picture. Ultimately, some of what it tries is going to go nowhere, failing miserably. Maybe Atala Prism will face the same fate,” I wrote in early November. “Or, optimistically, by the end of 2021, Ethiopia will have a fully-functioning blockchain-powered digital identity system.”
A better world. A more valuable crypto coin. The two go hand in hand.
What ADA-USD Isn’t
In many ways, what’s happened with cryptocurrencies, also happened to the global cannabis industry in its early days.
The ETFMG Alternative Harvest ETF (NYSEARCA:MJ) was launched in December 2015. It reached $1 billion in assets in February 2019, a little more than three years after its launch. It currently has $972 million in assets, the same amount three years earlier.
I don’t know how much you follow the cannabis industry, but the biggest issue with many companies operating today is that their fundamentals are terrible. Even Canopy Growth (NASDAQ:CGC), which I consider one of the better Canadian cannabis companies, is having a tough time growing its business.
In November, Canopy reported its fiscal Q2 2022 results. They weren’t pretty. Revenues declined by 4% year-over-year; it had negative gross margins, wider losses, and $300 million less cash.
In one investment firm’s observation of its quarter, they essentially stated that Canopy CEO David Klein, who was the CFO of Constellation Brands (NYSE:STZ) before moving over to Canopy, was severely underperforming in his job.
Without fundamentals, it doesn’t matter how promising a business or cryptocurrency might appear; it’s got to deliver.
So, to hear Hoskinson say the following on YouTube rings true:
But as a consequence of local returns, people have developed very unhealthy views on how long things should take and where value comes from. And many people are starting to subscribe to the Greater Idiot Theory of get-in-fast, get-out-fast and somehow you will have this great life.
Paraphrasing Hoskinson, Cardano isn’t a get-rich-quick scheme. On the contrary, it’s precisely the opposite.
I hope he continues to bang the drum for fundamental analysis in the cryptocurrency industry. If Cardano follows its North Star, I do not doubt it will be worth a lot more than $52 billion in five years.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.