Why Cardano (ADA) Is My #1 Pick

We recently stated our upside bias for Cardano based on technical analysis, but why is Cardano our top crypto pick?

Technology

ADA currently processes around 300 transactions per second. The upcoming hydra update is set to massively increase transaction frequency. Each Hydra Node can process 1,000 transactions per second, and there are 1,000 such nodes – meaning that ADA will be able to process up to 1 Million transactions per second (theoretically, hah).

Cardano’s technology makes ADA a great solution for payments.

ADA Inflation / Deflation

ADA has a circulating supply of about 32 Billion ADA, and a max supply of 45 Billion. That’s around 2000x the Bitcoin market supply, hence the relatively low price of ADA.

ADA currently has an inflation rate of 5.7% (I know, that’s quite a turn-off), however the inflation rate of the crypto decreases exponentially over time. In 2030 the inflation rate of ADA is forecast at 0.9% per year, and if we assume 1% of supply is lost per year to human error this will make ADA deflationary.

Source: ADA Relative Inflation Rate, Solberg Invest

Knowing this, we anticipate ADA will have slow but consistent gains over a long term period. The long term value will likely increase as ADA becomes increasingly scarce / harder to make and earn. If you’d like to learn more about ADA’s inflation check out this great article on Solberg Invest.

Staking ADA / Cardano

Staking ADA typically receives returns after fees of 3-5%. Whilst this isn’t an earth shattering amount it partly offsets the impact of ADA’s current inflationary status. As ADA’s inflation rate decreases and ADA becomes relatively scarcer staking rewards are also likely to increase.

Around 74.2% of ADA is staked currently. $48,159,741,185 of ADA is staked, against the market cap of $64,896,515,283.

ADA is also likely the easiest cryptocurrency to stake in a pool with Yoroi or Binance staking, both of which have rewards of over 4% available. Another advantage of staking ADA is that stakers maintain control of their ADA and tokens are not locked. Coins can be withdrawn at discretion and there is no risk of losing funds when delegating (no slashing).

There are staking coins with higher rewards than ADA, however I anticipate that the reducing rate of inflation of ADA will have an extremely positive effect on the cryptocurrency’s price as well as future staking rewards. Whilst this is a speculative position, the current staking returns allow me to hold value against inflation.

Cardano Is Secure

Cardano uses the Ouroboros protocol, a proof of stake algorithm. This makes Cardano about as secure as any blockchain technology can be, so technology developed on Cardano’s infrastructure is highly unlikely.

Cardano is considered very secure in the crypto space.

Other ADA / Cardano Highlights

  • Cardano intends to create a financial operating system for the underbanked which will run financial applications and use the ADA cryptocurrency.
  • Stake pool operators can earn higher staking rewards (up to 7%).
  • Cardano allows financial and business experts with little to no knowledge / experience to create and execute smart contracts.

Currently ADA is trading at $2.01 USD.

ADA/USD 1W Chart, 8 Nov 2021.

Published by Tom Stewart

Head of data analytics at TradeProofer. Analyst at Opes Trading Group. FX enthusiast.

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