When you talk about third generation blockchain technology, it’s hard not to mention Cardano (ADA). This is one that’s drawn a huge amount of attention over the last six months, both from the perspective of investors/traders and the wider media, and it’s one that’s going to continue to do so as the current correction bottoms out and the bitcoin and wider cryptocurrency markets stage a recovery.
How can we be so confident?
People will say that bitcoin has no inherent value and while there’s a very strong argument that the differentiators between bitcoin and fiat are its inherent value, it’s not a particularly clear argument to make when you’re talking to someone who isn’t that familiar with the space.
This isn’t the case with Ethereum (ETH). ETH is used as a function-type asset to facilitate the execution of smart contracts, which in turn form the critical components of decentralized applications. That’s why Ethereum has taken off over the last twelve months (the latest correction aside, of course) – there’s a very easy value proposition associated with the ETH token and it’s rooted in increased demand of the platform and the parallel increased demand for the gas token.
And the same argument applies to ADA.
This is a token that very much supports the ecosystem with which it’s linked, meaning that so long as the adoption of said ecosystem continues to increase, the coin or token should increase in value.
And Cardano is attracting a huge amount of attention right now. Sure, the platform is in its early days and, as such, there’s a long way to go before Cardano can be classed as a serious competitor to Ethereum but that doesn’t mean this won’t happen – just that it’s a bit farther down the line.
There’s also a secondary input here that’s going to drive value in this coin going forward.
Specifically, the Weiss ratings.
As the price of bitcoin and its peers have crashed over the last few weeks, the attention that markets are paying towards the Weiss ratings has dropped off. However, at the same time, the global equities markets are struggling. What we expect, then, is a wave of capital transfer from the stock markets to the cryptocurrency markets.
Much of this capital is going to be what we might deem ‘new capital’ and it’s going to look for a mainstream interpretation of the quality of the various options in the space.
Take a look at the above mentioned Weiss ratings, and you’ll see that Cardano scores above a whole host of its major competitors. ADA has a B rating, while BTC has a C+ rating. Sure, there’s an argument that these ratings are nonsense and – in our eyes – the argument is somewhat valid. That’s not important, however.
These ratings are going to play a role in the way that new entrants judge their capital allocation and when they see a green box next to Cardano and a yellow box next to bitcoin, it’s going to influence acquisition decisions.
So for these reasons, we really don’t see ADA going anywhere but up from here.
Right now, the coin goes for $0.33 a piece and commands (at these prices) a market capitalization of $8.75 billion. At these metrics, however, ADA is down more than 75% from highs or, as is another way to put that, is available for just a quarter of the price it traded at the start of this month.
Stick it out and pick the winners.
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency.
Image courtesy of Cardano
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