The past few trading days have been brutal for crypto investors. But holders and HODLers of Cardano (CCC:ADA-USD) have had a much tougher time.
As you may recall, Cardano performed poorly while Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and its “Ethereum killer” rival Solana (CCC:SOL-USD) moved higher in November.
Unfortunately, that hasn’t stopped Cardano from sliding lower along with other cryptos, in the past month. Worse yet, the crypto sell-off may be intensifying. Worries about Covid-19’s Omicron variant and changes to Federal Reserve policies, are weighing on both stocks and digital assets.
As a result, Bitcoin’s back at $50,000. Ethereum briefly again fell below $4,000. In the case of ADA-USD? It’s well under $1.50 and fast approaching $1.30. However, while Cardano seems set to give back even more of its 2021 gains, the underlying fundamentals of this altcoin may actually be getting stronger.
That said, while Cardano is looking to still be a top possible Ethereum killer, this may not translate into a token price recovery. At least, if the shift to a risk-off mindset continues and cryptos across the board continue to fall.
The Latest With Cardano
Beyond just its recent price action, there have been a few developments with ADA-USD in recent weeks. One key positive is news of Cardano’s progress in developing its network into a major platform for DeFi (decentralized finance).
Thanks to its smart contract capability (implemented during the Alonzo upgrades), dApp developers are showing increased interest in Cardano. As of late, there’s been some concern that it would be left in the dust as Ethereum cemented its DeFi dominance and Solana, with its faster transaction speeds, kept on supplanting it as the top Ethereum killer.
Along with growing attention from the DeFi/dApp community, Cardano made progress in the number of wallets staking it. On Dec. 5, the number of wallets staking ADA-USD crossed the 1 million mark. This, too, points to its increased DeFi usage and helps to support the long-term bull case for it. However, along with these bits of positive news, there’s been one major bad development.
I’m talking about its delisting from eToro’s crypto exchange. This bit of news played a secondary role in extending Cardano’s price decline. Not only that, it has since been outweighed by market pressures on the coin that could carry on in the weeks ahead, and possibly longer.
Why the ADA-USD Plunge May Be Far From Over
As you can see from my past coverage of Cardano, I’ve taken a bullish view on the crypto. If blockchain finance continues to rise in popularity and this network becomes one of the most widely used in DeFi, Cardano may have the potential to see a gradual, yet substantial, rise in price.
That said, it may be awhile before this starts to play out again. For now, crypto prices could continue to fall as Omicron/Fed worries compel investors to adopt a defensive mindset.
As for the longer term? From here, it could play out one of two ways.
First, the more bullish scenario. Once the recent market maelstrom passes, crypto’s adoption by the masses could accelerate. With this, more capital could cycle into this asset class, enabling it to recover then reach even higher prices across the board.
But in a more bearish scenario, blockchain finance fails to gain critical mass. The market in turn then re-assesses crypto market valuations. Similar to what happened during the dot-com bubble, crypto prices could keep on falling as the market realizes it put the cart before the horse. After they bottom out, cryptos could deliver subpar returns much like we’ve seen play out in-between crypto bubbles, most recently between late 2018 and mid-2020.
The Best Move Today
Recent headlines suggest that ADA-USD is becoming a crypto with greater functionality/utility by the day. But this alone won’t determine where it heads from here, whether in the near term, or in the years ahead.
Put simply, it’s going to be the overall direction of crypto prices that determines where Cardano heads next. If the more optimistic scenario I detailed above plays out, it may not be long before it bottoms out. If the more bearish scenario comes true, there’s little use in buying today. Instead of buying the dip, you can find yourself trying to catch a falling knife.
So, with Cardano and other major cryptos at a crossroads, what’s the best move? It all depends on whether you are bullish or bearish on cryptos as a whole. Expect this altcoin to move in line with its peers.
On the date of publication, Thomas Niel held LONG positions in Bitcoin and Ethereum. He did not hold any of the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
