Cardano (ADA) recently experienced an impressive price surge of 23.9% on July 13, leaving investors intrigued about its potential for further gains. This significant rally was fueled by a favorable judicial decision regarding XRP (XRP), which raised questions about whether Cardano has what it takes to break above the $0.40 mark. Despite this positive development, it is important to approach the situation with caution due to certain regulatory risks associated with the latest XRP event.
Reasons Supporting Cardano’s Bullish Momentum
There are three key reasons that support Cardano’s bullish momentum and indicate its potential for future growth:
1. Integration of Other Blockchains
Cardano has the potential to integrate with other blockchains, which can significantly enhance its capabilities and expand its ecosystem. Recently, Charles Hoskinson, the founder of Cardano, proposed incorporating Algorand (ALGO) as a Cardano sidechain. Although this may seem unlikely at first, the proposal gains relevance in light of AlgoFi’s shutdown announcement following allegations of security-like characteristics by the SEC. This integration could help Algorand avoid regulatory scrutiny and boost the adoption of Cardano’s ecosystem. Furthermore, smaller altcoins could be incentivized to become Cardano sidechains, benefiting from Cardano’s rich treasury and marketing potential.
2. Increased Activity in Decentralized Applications (DApps)
Smart contract activity plays a crucial role in the success of blockchains designed for DApps, especially as Ethereum grapples with soaring transaction fees. Cardano’s activity in terms of deposits locked on smart contracts and the number of DApp users is essential in determining the sustainability of its current bull run. According to DefiLlama, Cardano’s total value locked (TVL) in ADA terms saw a 10% month-on-month increase, reaching 550 million ADA on July 14. Additionally, decentralized exchange volumes witnessed a 6% surge over the past seven days. These figures indicate growing interest and engagement in Cardano’s ecosystem.
3. Decreased Regulatory Risk
The recent XRP ruling has helped alleviate regulatory risks associated with Cardano. The United States Securities and Exchange Commission (SEC) referred to Cardano as a potential security during the recent court actions against Coinbase and Binance. However, it is important to note that while the staking offering may be considered a security, it does not pose a direct risk to Cardano or its development companies. The XRP ruling has provided some clarity and reassurance to investors, leading to an increase in the rally of ADA and other coins impacted by the SEC’s comments.
Regulatory Setbacks and Limited Demand for ADA’s Services
While Cardano’s recent rally is encouraging, there are still certain risks to consider before investing in the project.
Despite the favorable XRP decision, it is crucial to note that Cardano’s initial coin offering (ICO) was not explicitly cleared by the court ruling, as it solely addressed sales via exchanges and over-the-counter desks. The ongoing XRP trial will further determine Cardano’s regulatory status.
Moreover, Cardano’s TVL of $200 million lags behind other layer-1 smart contract alternatives such as Tron ($5.9 billion), BNB Smart Chain ($3.4 billion), and Avalanche ($727 million). This suggests that there is still limited demand for ADA’s services, which may pose challenges for the project’s growth in the future.
Cardano’s recent price surge and favorable judicial decision have generated optimism among investors. The integration of other blockchains, increased activity in DApps, and decreased regulatory risks contribute to Cardano’s bullish momentum. However, it is important to remain cautious due to potential regulatory setbacks and the limited demand for ADA’s services.