Cardano (ADA-USD) is going through a rough patch. It dropped 73.4% from $2.97 on Sep. 1, 2021, to a low of 79 cents on Mar. 11. As of Apr. 16, it is still below $1.00 at 78 cents. That puts ADA crypto down over 68% from its peak and over 12% year-to-date.
However, just to get back to par with the end of last year, Cardano, the 8th largest crypto, has to rise 45.5%. That is much more than Ethereum (ETH-USD), the second-largest crypto. ETH crypto needs to rise just 23.9%, almost half of the move that ADA crypto has to make.
This is important for two reasons. First, both Cardano and Ethereum support smart contracts, non fungible tokens, and dApps (decentralized apps). This is especially the case in the financial arena where staking and yield farming contracts, known as DeFi (decentralized finance) apps, are prevalent.
The second reason is that both of these cryptos have large Total Value Locked (TVL). TVL represents the total amount of money tied up in staked crypto assets like smart contracts and deposits with yield and staking apps. As a cryptos’ TVL increases, its price tends to rise, as well. The good news is that Cardano is making progress in this regard. DefiLlama.com shows that the TVL at Cardano is now up to $208.6 million. By comparison, as of Jan. 20, it was only $3.2 million.
By contrast, Ethereum’s TVL has been fairly stable, not rising as much. At the end of Jan. 2022, it was $109 billion, but now its TVL is at $114 billion. In other words, the momentum in terms of acquiring more deposits per unit of its cryptocurrency is clearly on Cardano’s side. Cardano implemented the Alanzo fork in Sep. 2021 when smart contracts began on its platform. That has had a huge catalyst effect on the price of ADA crypto. Over the next year, this could push the crypto price higher if its TVL keeps rising.
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.
