Cardano has dropped 70% since September 2021; A long-road ahead?

Saif Naqvi
Source: Pixabay

Earlier a consistent top 5 altcoin performer, Cardano has slipped down the pecking order over the past few months. The monthly chart showed that Cardano has consistently made losses over the last six months, falling from a graceful ATH of $3.1 to its lowest point of $0.74 in February. So what exactly happened to Cardano and can the smart contract operator make any progress in 2022?

Cardano Monthly Chart

Source: TradingView

At first, Cardano’s losses can easily be attributed to broader market tensions. Bitcoin’s ATH in November was followed by a prolonged downtrend which triggered a domino effect across most altcoins. Losses heightened in 2022 February as geopolitical tensions got the better of crypto investors.

However, Cardano’s troubles began even before Bitcoin touched record levels last year. Between September-November, ADA’s value declined by 50% on the chart. During the same time, Bitcoin and Ethereum rose by 26% and 37%, respectively. To understand the disparity between the numbers, it’s necessary to trace back Cardano’s development in its best-ever month – October 2021.

Community Awaits Alonzo

Revered for its energy-efficient proof-of-stake mechanism which utilized the Ouroboros protocol, Cardano had cemented its place among the crypto elites by June last year. The project To go toe to toe with Ethereum, Cardano decided to deploy smart contract functionality through a hard fork called Alonzo. The move was praised by the community and demand for Cardano spiked progressively. This resulted in a landmark month of October in which the alt’s value rose by 110%.

However, the coming of Alonzo turned out to be a classic case of the buy the rumor and selling the news. The Alonzo testnet faced some difficulties where some users were unable to use the DEX’s swap function. A thread revealing the same gained traction within the community. Low network growth at the time was another issue that plagued the project.

Source: Twitter

Ironically, ADA’s value declined by 24% during September – the same month Alonzo’s hard fork went live.

eToro Delists ADA

Come November 2021 and Bitcoin’s value started to fall off from record heights. Losses immediately reflected on the top altcoins as well. To make matters worse, Israeli crypto investment platform eToro delisted Cardano amid regulatory concerns about the crypto. Cardano founder Charles Hoskinson says he was ‘blindsided‘ by eToro’s decision to delist ADA for US users.

Emergence of alternate solutions Solana and Avalanche

The second half of 2021 was led by the emergence of other Ethereum killers – Solana and Avalanche. Offering higher transaction speeds of 50,000 (Solana) and 4,500 (Avalanche) compared to Cardano’s 250 transacting on both platforms is cheaper and faster compared to Cardano. Over the past few months, both projects have emerged as a top 10 contender.

Road Ahead

The abovementioned factors have not deterred Cardano from advancing its network. Its upcoming layer 2 solutions called Hyrda could be a game-changer for the platform if it goes according to plan. The same is expected to increase transaction speed up to 1 million tps, making it faster than both Solana and Avalanche. A proposal is also underway which would increase the average block side from 72 KB to 80 KB, allowing the network to carry more transactions.

At the same time, it’s also impressive that Cardano has maintained its top 10 ranking despite making losses for seven consecutive months. An active community continues to back the project and with some important developments to come, those expecting ADA to fade out of relevancy could be severely mistaken.