Arguably the most frustrating cryptocurrency within the top 10 digital assets ranked by market capitalization, Cardano (ADA-USD) has recently toyed with the prospect of another stunning rally, with ADA poking its head above the critical $1 mark earlier this month. Since then, however, the coin has dropped into penny-stock territory, raising concerns about longer-term viability.
On the technical analysis front, it’s possible that Cardano could rise higher from here. True, the loss of a key psychological threshold is incredibly distracting. At the same time, it’s not as if ADA is trading for single-cent prices. Instead, it has ranged arguably in a buy zone recently between 87 cents and 96 cents, raising speculators’ hopes.
As well, fundamental factors seem to confirm justification for the optimistic narrative. The team behind Cardano is making significant progress in its Hydra initiative, which will serve as a “scaling solution to maximize throughput, minimize latency, incur low to no costs in doing so, and significantly reduce storage requirements.”
It’s all great stuff, but the risk is that this fundamental catalyst is a bit like rearranging deck chairs on the Titanic.
Before you fire up an angry email, let me explain. There could be a tremendous benefit in rearranging the deck chairs so as to maximize profitability while minimizing overhead, given one key assumption: the Titanic doesn’t hit the infamous iceberg. But if the ship follows the course of history, then the rearrangement won’t mean anything.
For Cardano, investors will want to make sure that they’re focusing on investment sentiment for the crypto sector broadly. Chances are, the masses won’t give a hoot about the granularity of Hydra. They’ll want to know one thing: will Hydra make them money or not?
That’s part of the reason why I’ve been warning investors week in and week out about the $1 threshold. Stay above it and Cardano could fly higher due to investor confidence. Stay too long below it and that confidence can fade, particularly because there are now over 19,000 cryptos to choose from.
If at any point ADA loses the crowd, Hydra or no Hydra, it’s going to have a rough outing. Thus, investors will want to keep tabs on the emotions of the market, not just about blockchain deck chairs.
On the date of publication, Josh Enomoto held a LONG position in ADA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.