Cardano: After recovering above $1, will ADA face another halt?

Saif Naqvi
Source: Pixabay

Cardano has consistently rubbed shoulders with crypto elites over the past year. The project is making a name for itself among a new wave of ‘Ethereum Killers’ eyeing for a top spot on the crypto ladder.

As with any project competing in a fierce battleground, Cardano has sought to keep up with the game through new developments to its blockchain. However, the current plan of action is slow and meticulous and it’s important to evaluate how that could impact its price.

“We are taking a steady, methodical approach”

User activity on Cardano has grown significantly over the past few months, with smart contracts opening the doors to new DeFi possibilities. To accommodate an influx of new users while also enhancing its current userbase, Cardano focused on two objectives – scaling and optimization.

The first step to increase stabilization came by in November last year, whereby the block size was increased by 8KB to 72KB. The same was further increased to 80KB in February and more increases are lined up over the coming months, including higher transaction rates. Why are the updates rolled out gradually and not just in one swipe? In short- to prevent the system from congestion. An IOHK blogpost read,

“Increasing the throughput of a permissionless blockchain is security-critical, as admitting more load to the system may introduce DoS-attack opportunities.”

Vasil Hard Fork

Now, it is definitely encouraging to see that Cardano is committed to scaling with the Vasil hard fork just a few months away. The change is touted to bring in new dApps and developers and a structured blockchain would be required to effectively handle the new workload. However, the team does expect periods of volatility as it assesses the impact of new changes to its network. By the team’s own admission “Yes, we anticipate periods of high demand, network congestion at times”

ADA Daily Chart

Source: TradingView

Getting to the crunch factor, how will these ‘methodical’ changes impact ADA’s price? As mentioned earlier, high volatility would be expected in brief phases. This was observed recently, with ADA’s price up by 44% in the last 10 days amidst a rising Total Value Locked (TVL). However, its long-term growth would most likely be slower-paced and methodical, just like the project’s current vision.

A consolidation phase could even take over as the new changes settle into the network. The most logical region for this phase to occur would be between a demand zone of $1.00-$1.16. Meanwhile, brief spikes on either side could be contained at $1.27 and $0.78. Meanwhile, a more long-term target lay at $1.88, from where ADA can tackle $2.00 and create a path for a new ATH.

It’s also worth keeping in mind that ADA’s near-term would be dependent on broader market changes as well so one must account for macro developments in the crypto space before hype trading.