There are several cryptocurrencies that are gaining in momentum with dApps, users and development of it’s blockchain.
The Cardano blockchain with the ADA token is one such cryptocurrency.
The ADA token launched in 2015 by founder Charles Hoskinson who is also the co-founder of the Ethereum blockchain and cryptocurrency alongside Vitalik Buterin.
The founder is no stranger to successful blockchain and cryptocurrency launches.
The ADA cryptocurrency has continued to fall from $1.50 in early 2022 from its all-time high of $2.94 in the summer of 2021.
There are two main reasons for this, both will be covered in this article.
We have written other articles as to whether other cryptocurrencies, such as MANA, SAND and MATIC could reach the magical $100 per coin value, but as is always the case we can’t look at the price of the coin, but instead the market capital.
Market capital is one of the best analytical ways of determining the possibility of a cryptocurrency increasing in value by 100x or even 200x.
This is because the market capital shows the current value of the cryptocurrency.
Ethereum managed to increase its price from $0.81 to over $4,300 in 2021.
Based on this it would look feasible for ADA to increase from $0.50 to just $100, but ultimately it is the resulting factor and end result of the market capital that would provide a probability.
Market Capital of a Cryptocurrency
A cryptocurrencies market capital is the calculation of the number of tokens in the ecosystem multiplied by the current coin price.
A simplified way of looking at this is using the following calculation:
Market Value (Cap) = Number of tokens in circulation * Trading Price.
A very high market capital means a huge sum of money has already been invested into the company, and growth becomes more difficult.
A low market capital generally means a lower number of people have invested and therefore it has room to grow.
The value of the coin price of the cryptocurrency has no bearing on the value of the crypto or its ability to grow.
Let’s look at this with an example.
Cryptocurrency A may have 2,000,000 circulating coins with a trade value of $15 a coin, giving this cryptocurrency a market capital of $30,000,000.
Cryptocurrency B may have 2 billion circulating coins with a trade value of $0.75 a coin, giving this cryptocurrency a market capital of $1,500,000,000.
Even though the coin price of cryptocurrency A is 20x higher than the coin price of cryptocurrency B, the latter is worth 50x more.
It would be much easier for cryptocurrency A to increase 100x and be worth $3 billion that it will be for cryptocurrency B to increase 100x and be worth $150 billion!
Therefore only the market capital matters when assessing value and growth potential.
Market Capital of ADA on the Cardano Blockchain
As at time of publishing, ADA had a market capital of $14.5 billion (you can check the latest market capital of ADA here).
In comparison, the current market capital of Bitcoin is around $370 billion and the current market capital of Ethereum is around $160 billion.
ADA has a sizeable market capital already.
Many cryptocurrency investors have already pumped into Cardano’s ADA making it one of the top 10 largest and most valuable cryptocurrencies.
It ADA reached $100 it would mean the current market capital would need to reach $1.45 trillion!
This not only would mean a value almost four times that of Bitcoin, and ten times that of Ethereum, it would make it one of the most valuable companies in the world – more valuable than Amazon, and more than twice as valuable as Tesla!
Already this makes ADA’s chances of reaching $100 a coin incredibly challenging.
What has Affected ADA’s Market Capital
At the start of 2022, ADA had a market capital of around $35 billion, and the cryptocurrency had a price of $1.50 a coin.
This though a considerable cry from the highs of summer 2021 where its price stood at almost $3 a coin.
A cryptocurrencies market capital is affected by one, or a combination, or two things:
- More, or less, coins in circulation
- An increase or decrease in demand
More coins can enter the market as more coins are mined, which is done by miners completing complex algorithms to validate transactions and being rewarded with more coins.
Coins can also be burned, which can decrease the number of coins in circulation and with all things being equal would mean an increase in coin price as the same investment amount is now divided by less coins.
A major factor in a coin’s price, and its market capital, is demand.
Basic laws of supply and demand in a free market means the higher the demand, the higher the price, and vice versa.
If Cardano announced incredibly positive news that saw investment potential money would pour in from all sides of the globe which would naturally increase the price of the existing coins.
Unfortunately, since summer 2021 there have been two events that have led to the fall of ADA’s price.
The 2022 Bear Market
In spring 2022 an inevitable bear market hit the stock and crypto market fueled by rising utility and food costs, as well a shortage of goods and deliveries because of the Covid pandemic.
The money that had free flowed into the system because of the Covid impact on business, and low interest rates, meant spend was high and inflation soared.
The natural remedy for rising inflation is for the interest rates to rise, which has its own affect on households due to an increase of cost of borrowing, namely mortgages.
This isn’t going to be an article on fiscal studies or monetary policy, but all the triggers sent stock markets tumbling and the gold rush stages of the cryptocurrency and NFT markets dried up with them.
This decrease has hit almost every cryptocurrency very hard, including ADA.
Scalability and Transactional Delays
Although ADA has been affected heavily due to the 2022 bear market, it started to reduce in price and market capital before the bear market took hold.
Part of ADA’s business goal is to provide scalability and interoperability.
Simply put they want a blockchain that can scale as the number of users increase and want the blockchain to be compatible with as many dApps, cryptocurrencies and blockchains as possible.
Unfortunately, the number of transactions possible on the Cardano blockchain although much higher than Bitcoin’s struggled to keep up with demand when the full dApp launched on its network.
The bad news from this damaged investor confidence and started the decrease in demand and therefore market capital and price as investors pulled out.
The combination of these two factors are, in the main, the drivers behind the fall in ADA’s price.
Could ADA reach $100?
Cardano, despite current setbacks, has only of the most loyal fans and has a large and growing number of companies, investment houses and even country Governments signing up to use Cardano’s services.
It has demand and although its full potential may not be realized for another few years, it has the potential to grow much further than its current market capital indicates.
Although ADA could, over the next few years, increase 10x and become a $150 billion cryptocurrency – and the path looks open to do so – it will take a huge adoption from standard non-cryptocurrency investors to 100x in value.
No one, when Bitcoin was trading at $0.49 a coin in 2007, saw a potential for it to be worth $51,000 a coin in just over a decade later.
Just $10 put into Bitcoin in 2007 would have been worth $1 million in 2021.
No one knows where the cryptocurrency market will turn, but with current awareness and investors, Government bodies and investment institutions all now looking at cryptocurrency and blockchain technology seriously, I don’t think anyone can rule anything out!