From the technological upgrade perspective, ever since Cardano (ADA) ‘s Alonzo hard fork was implemented in September 2021, the number of smart contracts went up from 0 to 3,489 in October 2023. However, the value of DeFi (TVL) that was locked in was only 320 million US dollars, a far cry from Ethereum (21 billion US dollars) and Solana (1.2 billion US dollars). If the growth rate of the ecosystem stays at the current average monthly rate of 14% for Dapps, the TVL, in the view of the Compound model, should reach more than 2 billion US dollars (equivalent to 25% of the current market value) in order to trigger a price explosion. The expected timeline is Q2 of 2025. The past experience is that six months after Ethereum TVL was 1 billion US dollars, its price increased by 380%, while Cardano’s TVL/market cap ratio (0.07) was only 46.7% of Ethereum’s (0.15), showing a tremendous lag in the ecosystem.
On the on-chain data front, active Cardano addresses declined from 580,000 per day in January 2023 to 340,000 per day in October, a drop of 41.4%. Staking percentage, however, remained at 63.2% (about 21.2 billion ADA), yielding 4.1% a year, which is superior to the zero return of Bitcoin and Ethereum 2.0’s 3.8%. If the pledge ratio is higher than 70% (another 2.6 billion ADA would need to be locked up), reducing the supply in circulation within the market might push the price 15% to 20% higher in the short run. However, according to Santiment statistics, the amount of whale addresses with over 1 million ADA decreased from an all-time high of 382 in 2022 to 287 (24.9% down), and diversification of large holdings could dampen the ferocity of price swings.
In terms of the extent of practical implementations, Cardano and the government of Ethiopia’s joint Atala PRISM project stores the digital identity of 5 million students. Nevertheless, up to 2023, only 12% of deployment (600,000 users) has been completed, with less than 2,000 on-chain operations per day on average. In contrast, Visa’s stablecoin settlement test on Solana processes 470,000 transactions per day, with a large efficiency gap. And if Cardano’s African partners (such as Rwanda and Tanzania) launch full-scale government on-chain services in 2024 (to a base of 10 million people), it could drive a 300% expansion in demand for ADA payments, but it would need to break through the local fiat currency exchange channel barriers (only three compliant exchanges presently support ADA/ African fiat currency exchange).
In the competitive market, Cardano’s TPS (Transactions per Second) is 250, higher than Ethereum’s 15 but much lower than Solana’s 2,458. Additionally, the degree of node centralization is relatively high (the top 10 staking pools control 31.5% of the equity). Its developer activity is in place at 9th (average of 1,127 code submissions per month), behind Polkadot (2,405) and Avalanche (1,893), according to the Messari report. If the Voltaire phase in 2024 achieves total decentralized governance (budget: 6 million ADA per year), the governance participation rate needs to increase from the current 4.3% to over 20% in order to keep up with the competition.
Concerning regulatory risks, when the US SEC sued Binance and Coinbase in June 2023, it also named ADA as an “unregistered security.”. If the case is proven, delisting from US exchanges would potentially cut liquidity by 45% (look at the 78% decline in trading volume after when XRP was being sued). However, the Cardano Foundation has invested 12 million US dollars in compliance construction. Its ABN AmRO cooperation project shows that the compliance rate with the EU MiCA regulations has been 67%, and it is expected that after being fully compliant in 2025, regulatory suppression can be eliminated.
The market cycle model shows that the 90-day correlation coefficient between the ADA price and Bitcoin is 0.82. If the 2016 bull runs (+285%) and 2020 (+559%) are repeated after the Bitcoin halving in 2024, ADA can repeat the same and reach $5.8 (a rise of 2,130% from the current price of $0.26). However, it has to break through the historical resistance level of $3.1 in September 2021. Glassnode’s MVRV Z-Score metric shows that the current price of ADA is -0.37 (historical bottom range is -0.5 to -0.3), similar to the situation in March 2020, and the price has risen by 1,004,000 in the following 12 months. Given technical, environmental, and cyclical factors, the when will cardano explode potential time frame can be late 2024 to mid-2025. The breaking point factors are TVL greater than 2 billion US dollars, clarification compliance and breaking through of Bitcoin above 100,000 US dollars.