In the peak of the 2020 to 2021 bull run, Cardano’s native token ADA surged to an impressive high of $3 in August, following the activation of smart contracts after the Alonzo hard fork introduced the Goguen phase. Despite this milestone, the token has been on a relentless downward trajectory since then. According to Atomic Wallet analysts, ADA has plummeted by over 90% from its zenith, now trading at around $0.32, with immediate support found at the psychological level of $0.30.
The question posed by traders and analysts alike is whether the activation of smart contracts effectively “killed” ADA’s valuation. The subsequent decline, exacerbated by the crypto winter of 2022, has left many investors from August 2021 holding significant losses. As of now, it remains a point of contention if ADA will manage to recover in the foreseeable future and make up for the steep losses experienced over the last few years.
The introduction of the Alonzo hard fork marked a significant advancement for Cardano, enabling developers to finally launch decentralized applications (dApps) and creating an opportunity to compete with Ethereum and other smart contract-supporting platforms. Despite the criticisms that Cardano developers faced for perceived delays and substantial development expenditures, the post-Alonzo era unlocked the potential for complex smart contracts via Plutus scripts, facilitating the operation of dApps on the network, with all fees payable in ADA.
Since then, Cardano’s ecosystem has evolved, as evidenced by the total value locked (TVL) in its DeFi protocols. According to DeFiLlama, assets managed by Cardano-based DeFi protocols now exceed $177 million. While this figure is modest compared to Ethereum and the BNB Chain, it highlights the progress made by developers in leveraging smart contract capabilities to build a range of solutions on the network.
However, there is a notable disconnection between ADA’s current valuation and the expectations from holders following the Goguen phase. As Cardano transitions from the Basho stage to Voltaire, the platform’s development is set to focus on decentralizing governance. This final phase aims to enhance ADA’s utility, enabling holders to vote on proposals and directly influence network improvements. Additionally, the establishment of a treasury will provide funding for projects deploying on Cardano. Currently, the Chang hard fork is underway, with about 33% of all stake pool operators (SPOs) onboard.
Despite these developments, ADA continues to face significant selling pressure, with the potential to drop to 2023 lows of approximately $0.22 if market conditions do not improve. Conversely, if ADA can climb above $0.50, it could trigger a bullish push towards the highs anticipated in March 2024.
