Cardano (ADA) explained: What investors need to know amid market swings

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Cardano (ADA) has drawn recent attention with its historic price spike at the start of the month – reaching nearly $1.13 late in the day on March 2 – only to dip shortly after, down to $0.74 by March 7. Both the price spike and the volatility have led to much speculation in the crypto sector, which is currently experiencing high volatility across nearly all cryptocurrencies. In the first few days of March, some crypto experts predicted a continued bullish market for Cardano, but now Cardano appears to be trending more bearish. As you watch Cardano’s price fluctuate, what is Cardano, and what should you expect?

A Quick Guide to Cardano

In many ways, Cardano is like a younger sibling to Ethereum; in fact, it was launched by one of Ethereum’s co-founders, Charles Hoskinson, in 2017, following disagreements about how to develop the other platform. Like Ethereum and unlike Bitcoin, Cardano was designed to evolve into a platform for decentralized finance apps and smart contracts. Unlike a peer-to-peer payment system, Cardano is intended for the growth of a blockchain ecosystem that allows developers to create other crypto tokens and decentralized finance apps. Cardano aspires to be a platform hosting these connected apps, like the Apple and Android stores, but decentralized.

Cardano aims to offer banking services to “the world’s unbanked.” The company’s crypto token, ADA, is named after Augusta Ada King, the British aristocrat often considered the world’s first computer programmer. The token can be purchased on most crypto exchanges.

Adding Smart Contracts

Cardano added support for smart contracts in 2021, a crucial step if the platform is to compete with Ethereum and other large DeFi blockchain platforms. Currently, the update providing support for smart contracts is limited to Cardano’s test network, where developers use smart contracts to create NFTs and manage multiple crypto assets. The plan is to bring these features to Cardano’s main network in the future.

How Cardano is Scaling Up

Cardano has grown quickly because it relies on a proof-of-stake (PoS) system, allowing quicker scalability with less computing power. Ethereum more recently moved to a PoS system in a move that has sometimes been dubbed “Ethereum 2.0.” Cryptocurrency staking is a consensus mechanism that allows users of the

blockchain platform to become validators by “staking” the blockchain’s native cryptocurrency–in this case, ADA. In other words, interested investors pledge a specified amount of ADA as a stake that the platform holds as collateral – a preventative against bad actors. Validators then passively earn a percentage of their stake.

Cardano’s PoS protocol is Ouroboros, the first peer-reviewed blockchain protocol. Cardano is the first blockchain to use it. The protocol intends to give the Cardano blockchain more scalability for global growth without compromising security.

What Is Ahead for Cardano?

With Cardano’s price fluctuating quickly, it is difficult to predict what the market will look like for ADA in the weeks ahead. However, there are three indicators of a possible bull market ahead for Cardano. The first is Cardano’s planned integration with BitcoinOS, which could give Cardano access to Bitcoin’s $1+ trillion in liquidity. Some crypto investors have been predicting a dramatic breakout for Cardano since January.

Second, Cardano is in its final stage of planned development, its “Voltaire” era. Earlier stages, Byron, Shelley, Goguen, and Basho, were similarly named after other poets and philosophers. Voltaire aims to add voting and treasury management to the blockchain network. As this progresses, Cardano may be able to scale much faster than in the past.

Third, Cardano’s developers and investors hope for regulatory approval in 2025 from the U.S. SEC of an exchange-traded fund (ETF) for ADA. Because Cardano is one of a very small number of blockchain projects based in the United States that have a market capitalization over $35 billion, Cardano could be up for approval if the SEC follows their end-of-January approval of ETFs for Bitcoin and Ethereum with approvals for other cryptocurrency ETFs.

While no one can guarantee what will or will not happen with any blockchain platform, Cardano is undoubtedly a rising platform to watch.

*Investing involves risk and your investment may lose value. Past performance gives no indication of future results. These statements do not constitute and cannot replace investment or financial advice.