The past few trading days have been brutal for crypto investors. But the holders and the HODLers of Cardano (CCC:ADA-USD) had a much more difficult time.
As you may recall, Cardano performed poorly for Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and its rival “Ethereum killer” Solana (CCC:SOL-USD) increased in November.
Unfortunately, that hasn’t stopped Cardano from sliding lower with other cryptos, over the past month. Worse yet, the sale of crypto could intensify. Concerns over the Omicron variant of Covid-19 and changes in Federal Reserve policies weigh on both stocks and digital assets.
As a result, Bitcoin comes down to $ 50,000. Ethereum briefly fell below $ 4,000 again. In the case of ADA-USD? It is well below $ 1.50 and is quickly approaching $ 1.30. However, while Cardano looks set to give back even more of its earnings in 2021, the underlying fundamentals of this altcoin may actually strengthen.
That said, while Cardano still seeks to be one of Ethereum’s top killers, this may not translate into a token price rally. At least if the shift to a risk mentality continues and cryptos across the board continue to fall.
The last one with Cardano
Beyond its recent price movement, there have been some developments with ADA-USD in recent weeks. One of the main bright spots is the news of Cardano’s progress in develop its network into a major platform for DeFi (decentralized finance).
Thanks to its smart contract capability (implemented during Alonzo upgrades), dApp developers are showing increased interest in Cardano. Lately, there have been concerns that it may remain in the dust as Ethereum consolidates its dominance over DeFi and Solana, with its faster transaction speeds, continues to supplant it as Ethereum’s premier killer.
Along with the growing attention from the DeFi / dApp community, Cardano has grown in the number of wallets staking it. On December 5, the number of portfolios staking ADA-USD crossed the million mark. It also indicates his increased use of DeFi and helps support the long term bull case. However, in addition to this positive news, there has been a major bad development.
I’m talking about its delisting from eToro’s crypto exchange. This news played a secondary role in extending the Cardano price drop. Not only that, it has since been offset by market pressures on the coin which may continue in the weeks to come, and possibly longer.
Why the ADA-USD plunge may be far from over
As you can see from my past coverage of Cardano, I took a bullish view of crypto. If blockchain finance continues to gain popularity and this network becomes one of the most widely used in DeFi, Cardano could have the potential to see a gradual, but substantial, increase in prices.
Having said that, it may take a while before it starts all over again. For now, crypto prices may continue to fall as Omicron / Fed concerns force investors to adopt a defensive mindset.
As for the longer term? From there, it could go two ways.
First, the most bullish scenario. Once the recent market maelstrom passes, mass adoption of crypto could accelerate. With this, more capital could flow into this asset class, allowing it to recover and then achieve even higher prices across the board.
But in a more bearish scenario, blockchain finance fails to gain critical mass. The market in turn then reassesses the valuations of the crypto market. Similar to what happened during the dot-com bubble, crypto prices may continue to fall as the market realizes it is putting the cart before the horse. Once bottomed, cryptos could generate below-average returns, just as we’ve seen unfold between crypto bubbles, most recently between late 2018 and mid-2020.
The best shot today
Recent headlines suggest that ADA-USD is emerging as a crypto with greater functionality / utility by the day. But that alone won’t determine where it heads from here, either in the short term or in the years to come.
Simply put, it will be the overall direction of crypto prices that will determine Cardano’s next step. If the most optimistic scenario I detailed above comes true, it may not be long before it hits bottom. If the more bearish scenario comes true, there is no point in buying today. Instead of buying the dip, you may find yourself trying to grab a falling knife.
So, with Cardano and other major cryptos at a crossroads, what’s the best move? It all depends on whether you are bullish or bearish on cryptos as a whole. Expect this altcoin to evolve in line with its peers.
At the date of publication, Thomas Niel held LONG positions in Bitcoin and Ethereum. He did not hold any of the other titles mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Thomas Niel, contributor for InvestorPlace.com, has been writing individual equity analysis for online publications since 2016.