Cardano Needs Help Getting Out of Its Steep Dive, but It Could Be a Contrarian Buy

Cardano (CCC:ADA-USD) has been on an extended decline ever since it peaked on Sept. 1 at $2.9634 per ADA-USD token. As of today, Jan. 14, ADA-USD is at $1.26.

The Cardano logo and description on a smartphone.
Source: Grey82 / Shutterstock.com

It reached a trough point on Dec. 20 at $1.2084, putting it down 59.1% from its former peak. However, since then, ADA-USD has drifted up (slightly). But it is still down over 58% from its peak.

Just like a host of other high market capitalization cryptos, Cardano has experienced a recent peak in early November and has taken quite a tumble since then. It now seems to be forming a trough point and could shape a price base from which it could turn around. This depends if most of the crypto-related selling has come to a close.

Cardano had two peak periods during 2021. The first was in April when it peaked at $2.3091 on May 15. So, its second peak in September at $2.9634 was 28% higher than the previous peak.

However, Cardano has shown a high degree of correlation with other major cryptos. When they begin to rise, it’s possible that ADA-USD could do so as well.

Where Things Stand With Cardano’s Development

Cardano’s weakness implies that some investors have truly lost faith in the cryptocurrency. Cardano may have to show significant progress toward smart contracts and other more advanced aspects of its platform development to win some of these investors back.

To this end, Cardano developers have been moving into producing protocols for making non-fungible tokens (NFTs) on the Cardano blockchain. This can be seen in this recent article by a group called Seabug on Medium.

The arrival of smart contract abilities for Cardano came about in September and helped push the price higher. But since then, there has been a dearth of developers jumping on the Cardano bandwagon to produce new Cardano-based smart contract apps and NFTs.

This upgrade was known as the Alanzo fork. The Alonzo fork enables smart contracts for Cardano using a software language called Plutus scripts. It is “a purpose-built smart contract development language,” according to the team that built the hard fork.

Developers can use the Cardano blockchain for decentralized exchanges (DEXs), NFTs, and external data (oracles) to power smart contracts apps.

However, I have been concerned in the past that developers have not taken up Cardano for smart contracts. Cardano still needs acceptance from developers to use the language in new smart contracts as well as decentralized applications (dApps), NFTs, or DEXs. How quickly that happens is anyone’s guess now.

As one analyst put it, “Cardano promises a lot but whether it can actually deliver remains to be seen,” according to Business Insider.

What To Do With Cardano

One example of this is that there is no major NFT marketplace that has taken up a large market share with trading in NFTs.

This could happen in the future. But for right now, Cardano’s smart contract platform has yet to catch on with new games, DeFi apps, NFTs, etc.

As a result, I suspect there could still be some downside in the ADA-USD price. But, on the other hand, it has already taken quite a beating.

Therefore, it’s probably a good time to begin accumulating some ADA-USD tokens, with a view to increasing the position as it gets cheaper. The reason is you can never really call a bottom in a stock or crypto investment.

When something appears cheap, or just to be contrarian, it usually pays off to begin taking a toehold stake. This allows the investor the trouble of trying to call a bottom in an asset price that is falling. I use this technique quite often, especially when I know that I will be a long-term holder of the asset. This might be a good time to do so with Cardano.

On the date of publication, Mark Hake did not hold (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.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.


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