Investing in Cardano: What to consider
Emerging into the cryptocurrency space in the last quarter of 2017, Cardano (ADA), is a top 10 cryptocurrency, that positioned itself as an attractive, top-tier altcoin. Built on a blockchain infrastructure, Cardano is designed to do more than just processing payments. While the ADA coin acts like most other cryptocurrencies, the Cardano blockchain network also enables running smart contracts, DApps (decentralised applications) and more. Based in Hong Kong, Cardano’s development was led by a former Ethereum co-founder and is based upon similar architecture with special elements which make it easier to implement new changes. Following its launch, Cardano was part of the great crypto bull run of late 2017 and early 2018, reaching a multi-billion dollar market cap.
Who should include Cardano in their portfolios?
Cryptocurrency traders: Even though it is new in comparison to some other top 10 cryptocurrencies, Cardano has attracted much attention and interest in the crypto space. Those who wish to have a balanced, crypto-based portfolio, could buy ADA.
Long-term investors: While opinions regarding the future of the crypto market vary greatly, those who believe in the long-term growth of the market could invest in Cardano as part of their overall diversified investment.
Day traders: Similar to most cryptocurrencies, Cardano can often show great volatility over short periods of time. Traders often try to take advantage of these opportunities to buy and sell Cardano over a short period in an attempt to generate short-term profit.
Blockchain enthusiasts: There are hundreds of cryptocurrencies available for trading and investing today. However, the number of successful blockchain ventures that also focus on giving developers access to the technology is far smaller. Those who believe in the technology and its promise should consider investing in Cardano.
What drives Cardano’s price?
Cryptocurrency prices are known to be very volatile, sometimes showing double-digit movements over the course of a single day. Like all financial assets, the Cardano chart is impacted by various factors, some relating to general market trends and others specifically to the cryptocurrency. Moreover, since on top of being a crypto, Cardano is also a blockchain development platform. Therefore, it has another set of factors that can impact the ADA price. Here are a few of these factors:
Bitcoin: The world’s first and largest crypto (by market cap) is the yardstick by which all other cryptos are measured. Therefore, when Bitcoin prices move strongly in a certain direction, they can generate momentum in the market in the same direction, impacting the altcoin market, including Cardano.
Ethereum: One of the most popular platforms for developing blockchain apps, Ethereum, also has the second-largest market cap in the crypto market. Since Cardano’s architecture is designed to improve upon that of Ethereum, news relating to its potential, or generated by the flaws that Cardano overcame, can have an impact on Cardano’s price.
The blockchain industry: While still considered relatively new in the tech world, blockchain has the potential to impact numerous industries, due to its decentralised nature and its ability to verify users and transactions. As the field grows and progresses, companies such as Cardano, which aim to give developers tools to harness the technology, can benefit. Another major factor impacting the industry is the passing of regulations that either expand or limit the spread of cryptocurrencies, and could, therefore, affect demand.
Volatility in traditional markets: The debate as to the definition of cryptocurrencies is ongoing, with their specific financial role still lacking consensus. Some investors consider them to be an alternative to traditional markets, turning to them when mainstream markets become too volatile or are on the decline. During such times, Cardano (alongside other cryptos) can be in high demand.
Mainstream crypto acceptance: In just a few years, cryptocurrencies went from being an esoteric financial instrument to being very popular among many traders and investors around the world. One thing that contributes to their increasing popularity is the mainstream adoption of cryptocurrencies and the growing number of well-known, traditional financial entities entering the field. Being accepted by these institutions opens the door for many other traders and investors and can contribute to Cardano’s demand and price.
Cardano: Improving upon Ethereum
If Bitcoin is known as the benchmark for all cryptos, Ethereum earned the title of being the first widespread crypto network to enable its users to develop their own blockchain apps. Following Ethereum’s success, several other similar networks were founded, including China-based NEO, Hong Kong-based EOS and Cardano. It is no secret that Cardano took a lot of inspiration from Ethereum, which comes as no surprise when considering the fact that the project was led by a former Ethereum co-founder.
One of the main factors that differentiate between Cardano and Ethereum is the former’s dual-layer structure. Cardano’s architecture has two separate layers. The first layer, Cardano Settlement Layer (CSL), is the part of the network that runs ADA transactions and payments. The second layer, Cardano Computation Layer (CCL), is designed for running smart contracts and decentralised apps. This two-layer structure is designed to enable easier implementation of code changes (known as soft forks) when compared to Ethereum, in which both layers are intertwined.
History of Cardano
Launched in September 2017, Cardano was developed by Input Output Hong Kong (IOHK), a blockchain development company. The Cardano project was helmed by Charles Hoskinson, who was one of Ethereum’s co-founders. IOHK set out to create a blockchain platform that will both support cryptocurrency transactions and enable developers to create blockchain apps of their own. The project was regarded as a success, both on the cryptocurrency front, as the ADA token became a top 10 crypto, and the blockchain front, as many members of the blockchain space praised its design and potential. The crypto’s launch came just two months before the great crypto bull run of late 2017 and early 2018, and Cardano was one of the many cryptos to benefit, peaking in January of 2018, reaching an all-time high of more than $30 billion in market cap.
Conclusion: Cardano is a welcome addition to the blockchain space
There’s no doubt that the blockchain revolution has changed, and will continue to change, many aspects of technology. Whether or not cryptocurrencies live up to their promise in the long run, their underlying technology has the potential to become an instrumental part of the tech space. Since Cardano operates on both the crypto and blockchain development fronts, it has the tools to succeed in both aspects and promote real innovation as both a crypto and a blockchain platform.
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*This content is for informational and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. Your capital is at risk.