After a miserable 2022 that saw it lose more than 80% of its value, Cardano (ADA 4.59%) is looking to rebound in 2023. Currently, the cryptocurrency is trading for just $0.25, more than 90% below an all-time high of $3.10. As might be imagined, the majority of investors have soured on Cardano, which currently ranks as the ninth-largest cryptocurrency by market capitalization.
Right now, the consensus estimate is that Cardano will have a difficult time even doubling in value to $0.50, which is where it was trading in August 2022. Yet there is a best-case scenario in which Cardano actually hits $1 in 2023, based on several positive developments that have been taking place over the past 12 months. So let’s take a closer look.
Development activity at Cardano continues to take off
One major complaint that has always been leveled against Cardano is that it is a “ghost chain” where nothing of importance is taking place. In part, this criticism is true, because Cardano has always seemed to lag behind market leaders like Ethereum (ETH 3.06%) when it comes to new innovations. For example, Cardano only introduced smart contracts in 2021. For those of you keeping score at home, that’s a full six years after Ethereum unveiled them.
However, based on the numbers, it seems Cardano’s slow and steady approach to blockchain development is finally starting to pay off. In fact, crypto analytics firm Santiment recently noted that Cardano was the No. 1 blockchain in the world in 2022 by development activity. This is largely because of how much code Cardano developers are adding to open-source repositories, such as GitHub. Development activity is important because it likely signals new features are on the way or new products are about to ship.
According to Cardano, 2022 saw a huge spike in on-chain growth as measured by metrics such as new blockchain wallets, overall transaction activity, and new partnerships and collaborations. Now that smart contracts are live on the Cardano blockchain, it is opening up new opportunities in different market niches of the blockchain world, especially decentralized finance (DeFi). All of this could help to fuel new momentum around Cardano in 2023.
Could Cardano make a splash in DeFi?
Of particular note is Cardano’s entry into the world of decentralized finance. Without smart contracts, Cardano couldn’t become a significant player in DeFi, so it was a nonplayer in this market niche until late 2021. Moreover, without a big presence in DeFi, it was impossible to show major growth in total value locked (TVL), a key metric that investors use to gauge activity on a blockchain. Right now, Cardano ranks only 31st among all blockchains when it comes to TVL, which is one big reason investors have concluded that “nothing is happening” on Cardano.
However, Cardano seems about to hit it out of the park in 2023 when it comes to DeFi. That will boost TVL numbers, which in turn will help to shift investor perceptions of Cardano. There are at least three different DeFi projects at Cardano that are generating buzz right now: a new decentralized exchange (DEX), a new non-fungible token (NFT) marketplace, and a new DeFi protocol that enables the creation of “synthetic” financial assets. The goal of a synthetic asset is to mimic the price movement of a real-world financial asset, such as a stock, a fiat currency, or a real estate title, but with the help smart contracts and stablecoins so that it can trade on a blockchain.
Moreover, a big announcement at Cardano that has many crypto enthusiasts buzzing is the planned introduction of not one but two new stablecoins in 2023. Since stablecoins are one of the underpinnings of decentralized finance, this is potentially breakthrough news for Cardano.
How realistic is a $1 price target?
Given that Cardano is trading for just $0.25, a price target of $1 is very aggressive. Many things need to go right for this to happen, some of which are outside of Cardano’s control. Most obviously, the entire crypto market needs to turn around in 2023. If Bitcoin (BTC 0.48%) falls another 65% next year, it’s hard to imagine any scenario in which Cardano hits the $1 mark.
Right now, the consensus forecast for Cardano is that it will continue to trade in the relatively narrow band of $0.15 to $0.35 for the foreseeable future. In my opinion, that’s far too conservative a range for a cryptocurrency that is looking to enter an entirely new market niche — DeFi — in a major way. I’m bullish that Cardano will eventually hit $1. However, increasing in value by 300% over the next 12 months is probably too much of an ask for a cryptocurrency that hasn’t traded above $1 since April 2022.