The popularity of ADA, the native token of Cardano, surged during the 2020 to 2021 bull run, reaching an all-time high of $3 in August. However, the subsequent activation of smart contracts on the Cardano network following the Alonzo hard fork marked a turning point. Despite initial optimism, ADA has experienced a significant downtrend in its value by more than 90% since its peak.
While the activation of smart contracts through the Alonzo hard fork ushered in the Goguen phase, it also seems to have negatively impacted the valuation of ADA. Many investors who purchased ADA during the peak in August 2021 are now facing substantial losses as the price hovers around $0.32. This sharp decline, exacerbated by the 2022 crypto winter, raises questions about the long-term sustainability of ADA’s value.
The transition to the Goguen phase was a significant milestone for Cardano, enabling developers to deploy decentralized applications (dApps) and compete with other platforms supporting smart contracts like Ethereum. Despite facing criticism for delays and high development costs, Cardano has made strides in expanding its ecosystem. The introduction of Plutus scripts has allowed users to create complex smart contracts and run dApps on the network, albeit with fees payable in ADA.
Following the activation of smart contracts, the total value locked (TVL) in DeFi protocols on Cardano has grown to over $177 million, according to DeFiLlama. While this figure pales in comparison to Ethereum and Binance Smart Chain, developers have capitalized on the new capabilities to build solutions on the Cardano network. However, the disconnect between this ecosystem growth and ADA’s valuation remains a cause for concern among investors.
As Cardano progresses through subsequent phases like Basho and Voltaire, the governance of the platform is set to become more decentralized. Voltaire will empower ADA holders to vote on proposals and participate in network improvements directly. Furthermore, a treasury will be established to fund projects deployed on Cardano, fostering further development and innovation. Currently, the Chang hard fork is underway, with stake pool operators (SPOs) preparing for increased participation.
Despite the progress made with the activation of smart contracts and the growth of the Cardano ecosystem, ADA’s valuation continues to lag behind expectations. The ongoing selling pressure could further drive down prices, potentially reaching lows of around $0.22 in the absence of strong buyer support. However, if ADA manages to break above $0.50, bullish momentum could propel it to new highs in the coming years. The future of ADA and Cardano’s development remains uncertain, but with continued innovation and community engagement, there is potential for a brighter outlook ahead.
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