Cardano Is a Stable Crypto; but Why Aren’t Prices Growing? An Analysis

As a crypto trader, what if your investments were to increase by 100 times only to fall back to where they started from? Sounds like every crypto trader’s nightmare, right?

Well, this nightmare is now turning into a reality for all crypto investors who have been bullish on Cardano’s native token ADA. It delivered approximately a 3000% return on investment since its inception. However, after ADA reached an all-time high of USD 3.10 in September 2021, it started showing signs of retracement, and after steep sell-offs, its price came down to USD 0.53 approx.  

So, the pertinent questions worth pondering is: Cardano is a stable coin, so why then are Cardano’s price dropping? Or for that matter, what are the factors that are stopping Cardano’s price from going up? Let’s examine all these issues in this blog. 

But first off, here is a brief overview of Cardano: 

About Cardano 

Like any other blockchain network, Cardano is based on a decentralised network. It employs layer-1 technology of Proof of Stake (PoS) that runs on a consensus mechanism.  Its network is based on protocols that are meant to be energy efficient as compared to networks that were previously run by other crypto assets such as Bitcoin that were not environment-friendly. Cardano is a network, but to transact on that network, one has to use its native coin – ADA. 

What Is ADA

Cardano’s native coin is called ADA. It is mostly used for transactional purposes such as making peer- to- peer payments, rewards, or for staking. When prices of ADA rapidly increased in 2021, at one point, it became the third-largest crypto asset from a market capitalisation point of view. For the longest time, ADA did not leave the top 10 list of crypto coins and was starting to be considered a stable coin. 

To understand the journey of ADA from a stable coin to where it is now, let us explore the next section of this article.

Price Movement Chart & Recent Decrease in Prices 

Cardano Stable Coin

Source (coin marketcap) 

The price movement of ADA shows a clear peak of USD 3.1 in September 2021, and since then, it has been downhill so far. There are several technical indicators such as the Relative Strength Index (RSI) or some simpler indicators such as moving averages indicating neutral to bearish signs on the price of ADA. 

However, it is one thing to rely on technical indicators, but for investors, it is important to understand the fundamental logic behind any fall in price. To explore this in detail, let us discuss factors that are affecting the fall in the price of the Cardano coin. 

Possible Reasons Behind Why ADA Is Falling 

  • Fed’s Involvement in the Money Markets – In the last monetary policy, the US Federal government decided to hike interest rates to reduce the overall money supply in the economy. Such decisions were taken to tame global inflation. However, this meant that investors had an option of redirecting their money to government bonds that are now offering higher interest rates than before. The rate hike, in short, has led to a ‘capital flight’ situation where long-term investors are redirecting their money from one asset class, such as cryptos, to another asset class, such as government bonds. 
  • Competition over Other Layer-1 Network Coins – Cardano has been facing intense competition from its fellow coins that run on the layer-1 network too. However, other coins, such as Ether, Solana, and Avalanche, have been facing a fall in prices but not as much as ADA. Additionally, there are several other crypto coins that are being developed every day that run on a sophisticated layer-2 network and are making investors shift money from old technology to newer ones. 
  • Geopolitical dynamics and Global Sell-off – We are all aware of the geopolitical warfare that is going on between Russia and Ukraine. In such a hostile environment, there are many other countries that are imposing sanctions against other countries. Since crypto investors are global, amidst such sanctions, investors fear the imposition of a sanction might lead to their investments getting blocked in a foreign country. Seeing such a situation, investors are selling the majority of their investments. 

Future of Cardano Coin: A perspective 

Despite the fall in prices of ADA, Cardano has made some significant tie-ups in 2022, such as raising funds in ADA to plant 10 lakh trees, launching their fund-based platform DEX SundaeSwap – a decentralised exchange built on Cardano to help facilitate liquidity on Cardano network. 

Key Takeaways 

So far, we have discussed why Cardano’s price is dropping and what are the future plans of Cardano stable coin. But as investors, does this mean that one should not buy ADA anymore or is now the right time to buy Cardano? 

It is very important to research and study on your own before buying anything. One should not only look at the current market situation but also read about future developments. If there is anything more important than investing in the right coin, it is investing via a secure crypto exchange. One such exchange in India is Zebpay, India’s oldest Crypto exchange, which provides secure technology and a seamless trading experience. Start your journey by visiting Zebpay!

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

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