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Cardano May Be Struggling, But It Has a Long-Term Case for the Patient

For some Cardano (CCC:ADA-USD) investors it may seem like 2021 never happened.

The Cardano (ADA) token with other gold and silver tokens in the background.
Source: Shutterstock

As of this writing, the ADA token is trading around 84 cents. That’s a level it hasn’t seen since February 2021. In between, the token shot above $3, but it was not immune from the effects of the crypto sell-off. What this correction says about the long-term future of crypto is unclear.

The Russian invasion of Ukraine is highlighting a key benefit of decentralized finance, but for the moment, crypto is being considered a risk-on asset among less committed investors. That makes it difficult to forecast how low ADA may fall. 

Cardano enthusiasts are in an interesting position. They must model the same patience that Cardano is demonstrating as it builds its network.

Focus on the Long-Term 

Cardano is already growing into one of the fastest-growing Layer-1 blockchain networks. Since its inception, Cardano has been viewed as one of the leading competitors to, potentially, dethrone Ethereum (CCC:ETH-USD).

One reason is that Cardano is the first network to model the proof-of-stake protocol.  

In January, Cardano entered the third phase of building its network, the Basho phase. In this stage, the network is supposed to deliver improved performance and scalability.

As part of this phase, Cardano plans to release Hydra, its layer-2 solution. This will allow the network to handle millions of transactions per second (tps). As a comparison, Ethereum is still working to handle up to 100,000 tps. 

This will also be the stage in which Cardano introduces sidechains that will be interoperable with the main Cardano chain. This is the Mamba upgrade that Brenden Rearick wrote could be released this month. 

This measured approach may be frustrating to investors who are looking for short-term price movement. But it doesn’t matter how quickly Cardano moves through its five stages of development.

The important thing is that they continue to meet their timelines with the transparency that has been exhibited to date.

ADA Will Make the Cut 

Whatever role cryptocurrency will play in global finance is still taking shape. However, I’m of the opinion that if crypto is to gain widespread adoption, the universe of available coins/tokens will get smaller.

I base this on the premise that cryptocurrency is behaving like fiat currency. The value of a given cryptocurrency is being determined by two predominant factors: community adoption and supply and demand imbalances. 

I suppose this doesn’t preclude the number of cryptocurrencies to climb from 6,000 to 600,000 or more. But how much value will they have?  

Not everyone agrees with this position, but if the principle of scarcity means anything, then I believe I’m onto something.  

Cardano’s deliberate method of building its network will ensure that it will be around as a worthy competitor for Ethereum and perhaps more. This combination will continue to give developers (and ultimately buyers) confidence.  

Take a Lesson From Cardano 

It’s a paradox of sorts. Cardano is a blockchain network that is being scrupulously and scientifically built, and yet its native token is being driven by emotion.

There’s no telling how long ADA may be caught up in the aftermath of last year’s crypto craze. I don’t pretend to know how long the crypto sell-off may last, but if Cardano continues making progress at completing its road map it should have a solid long-term outlook. Now it’s up to investors to exercise the same discipline with the ADA token. 

On the date of publication, Chris Markoch held a LONG position in ETH. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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