There’s no denying that Cardano (CCC:ADA-USD) has been through many difficult times. From reaching its highest peak at $3.03 on Sep. 3 to currently being worth less than half of what it was back then, this coin is closer than ever to an inevitable decline into oblivion.
As ADA’s price entered a symmetrical triangle on the charts, it experienced an extended period of stability. However, by mid-October — with the lower support line broken — the cryptocurrency began its continued decline to new lows for this year.
ADA ended up entering a positive channel after its first consolidation, but it didn’t stay there for long. The price quickly descended again and currently remains encapsulated within this structure. ADA has always been an extremely volatile asset. It gets influenced by Bitcoin’s (CCC:BTC-USD) price movements more than any other cryptocurrency out there. When Cardano gets buy-side momentum, the price will rise again and hopefully recover from its extended losses.
It’s a shame, though. Cardano is one of a handful of coins with solid use cases and functionality. Cardano’s layer-two scaling solution, Hydra, is also inching closer to testnet launch. It will be a major catalyst for the altcoin moving forward. If you are willing to hold a token for a long period, then this is the one for you.
High Degree of Functionality
One of the most important features of a cryptocurrency is facilitating smart contracts. It’s no wonder why Ethereum (CCC:ETH-USD) and Cardano share this incredible potential. Charles Hoskinson, the founder of Cardano, is also a co-founder of Ethereum. So, there is a connection in more than one respect.
What makes smart contracts so special? Well, smart contract execution happens automatically once certain conditions are met — no need to waste time waiting around or contacting someone manually since everything gets finalized immediately. Cardano is a versatile blockchain that provides real innovation and disruption in the finance, healthcare, and law sectors.
In addition, the low transaction fees and fast speeds of Cardano are great for users looking to make fast trades. It is also more secure than others because it uses proof of stake (PoS) validation protocols, which means there’s no need for mining. Other altcoins are also looking to change their model to PoS, but Cardano is already using this mechanism, meaning it is a cut above the rest.
Cardano Is Better for the Environment Than Bitcoin
Cardano’s PoS concept, apart from allowing for quicker transaction speeds, is also energy efficient in comparison to a “proof of work” concept. This is partly due to its low consumption rates of around six gigawatt-hours annually per node on average — it only takes up the power of two power plants. In comparison, Bitcoin is a cryptocurrency that consumes energy in higher volumes than the Netherlands.
Energy consumption and crypto is a big point of contention. Ethical investors are skeptical of pouring capital into a space that consumes so much energy. Climate change is the main reason why Tesla no longer accepts Bitcoin as payment. Elon Musk’s announcement sent the price of bitcoin into freefall, sending investors running for cover. There is no such issue with Cardano.
Limited Supply Makes it a Good Hedge Against Inflation
Unlike other cryptos, Cardano has a hard cap. That provides it with a hedge against inflation. Bitcoin is capped at 21 million. The hard cap for Cardano is 45 billion ADAs, with roughly 31 billion already in circulation. If supply limits are reached, investors have a theoretical floor underneath their price of ADA if demand and fundamentals remain intact.
Cryptocurrencies are in high demand, and Cardano is one of the most sought-after. However, there’s always a risk regarding how capital flows into any given market because you never know what will happen next, especially with volatile cryptocurrencies! Investors should beware of these risks before getting too excited about their investment potentials.
Layer-2 Scaling Solution Imminent
Following the Cardano Alonzo hard fork, a network must evolve to compete and outdo other blockchains for scaling purposes. There have been efforts from within and from outside of this project toward promoting progressions that include smart contracts and decentralized finance.
That is where Cardano’s Layer-2 scaling solution, Hydra, will come into play. IOHK, responsible for developing Cardano, has not set an official release date for Hydra. However, this doesn’t mean it’s completely out of ideas. Cardano has a long way to go to become a main currency. It may be at least until 2022, or even 2023, when we see Cardano Hydra deployed on an active network with scalable nodes and Daedalus installed, as well.
Peer-Reviewed to Ensure There are no Weaknesses
One of the foremost reasons to invest in any crypto is upgrades. Without a dedicated development team, no coin will go anywhere. It is a major problem investors face when pouring capital into meme coins. Luckily, you do not have to face the same problems with Cardano.
Cardano’s peer-reviewed approach ensures no vulnerabilities before changes go live and affect millions of users. Cardano has a lot going for them in the battle of Ethereum vs. Cardano, including their focus on peer review, high assurance code, and sustainability, which all give them an edge as long as they can deliver what was promised to roadmap updates.
The Cardano project has an excellent academic team backing the platform. Charles Hoskinson is leading the charge. Having served as chief executive officer (CEO) of BitShares (CCC: BTS-USD) and Ethereum, he knows what it takes to launch an ambitious cryptocurrency venture into successful production use-case scenarios — not just theory or “pie in the sky” thinking, but implementation. The IOHK staff consists largely of subject matter experts in computer science, as well other related fields such as game theory and cybersecurity.
Treat Cardano Like an Investment, Not a Day Trade
For a while, Cardano’s price action was uneventful. Trading in a consolidation pattern is frustrating and ADA holders felt the pain. There was little to no indication there would be a reversal in fortunes. However, selling pressure pushed this Ethereum-killer down 63% in September after the broader crypto crash.
It is hard to predict what will happen with Cardano in the coming weeks. However, it might start a rally around Christmas next week, as bulls look to defend $1.20 as the next support level. However, if you want to wait it out, the token will return solid gains due to ADA’s functionality. That is the long-game you should consider when investing in Cardano.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.