Cardano’s had a rough 2022 until now, up 34% in the last month, and 26% in the last week. If you’re a Cardano holder, you’re likely thinking it’s about time. But this doesn’t mean that we’re without questions like why did this pump all of a sudden happen? How long will this last? And what does Cardano have in store for the rest of 2022? Well, it appears Cardano is following a logical sequence. If we see their three-month chart, we can see that a price spike happened in mid-January.
That might feel a little bit random, but the cause is dApp activity. In the case of January, that was the launch of SundaeSwap. Cardano saw a quick run-up in price before tumbling quite a bit lower along with the rest of the market. As unexciting as the price action was afterward, that spike in price was still very significant because it showed the world that Cardano can support a DEX. Of course, not without a few bugs, but a DEX nevertheless.
The good thing about negative price action is that it doesn’t mean developers stop building. Sure, they probably aren’t as stoked about building on a blockchain that’s decreasing in price, but that’s just crypto. When you’re up, you’re really up. When you’re down, you’re really down. But they’re still building. So we have that January spike and proof of concept, followed by this kind of pit of despair, and now we’re seeing significant gains again from that pit.
So what exactly is the cost?
Well, it turns out Cardano saw a huge spike in TVL. That’s Total Value Locked, basically money deposited within the ecosystem. As TVL increases generally a blockchain is considered to be worth more money. A higher TVL means it’s actually being used. Now the questions are how high is the TVL compared to other projects? And why the sudden spike?
First, the numbers. Thanks to DeFiLlama, we can take a look at all the top blockchains and see the total value locked on each chain so we can get a better analysis of what’s going on.
Checking out Cardano’s TVL chart for the last month, we can see an explosion of growth. This is a wonderful sign, but it doesn’t tell the entire story. To better understand this, we need to compare different chains to Cardano. Ethereum is by far the largest in TVL, followed by Terra and then the Binance Smart chain. In order to find Cardano, we have to scroll down quite a bit, down to 27th place. Here we can see Cardano has over $300 million in TBL, much, much higher than it was even a month ago.
And now you might be asking if Cardano is a top ten crypto, why is it TVL so much lower than many other chains? And the simple answer would be that TVL is only one piece of the puzzle to determining value, you have general technology, marketing partnerships, future upgrades, and a million other criteria all factored into the price of crypto.
Now don’t get me wrong, TVL is very important, but Cardano is being given a bit of extra benefit due to the other factors around its price thanks to their partnerships and roadmap. Now, if Cardano was still in 27th place a year from now, that would be cause for concern. So TVL is definitely a metric to keep an eye on. Either way, this value locked is trending upwards, so it means something changed in the network. What is it?
Well, first in January we saw that initial bump in TVL, thanks to the SundaeSwap launch. Then a new DEX on Cardano called Minswap launched. You might remember Minswap if you’ve been following Cardano for a while because they were in the news last August due to their test net debacle. What happened was they launched the testnet for their dApp and surprise surprise, the prototype needed work, but this caused kind of a media flurry at the time and it turned out to be quite overblown.
Either way, Minswap eventually fixed the issues and had a successful full launch in 2022, gobbling up more and more TVL for itself and for the Cardano ecosystem. But then they ran into another issue, a major one. Just recently Minswap went into maintenance mode for their smart contract that would have left Minswap vulnerable to exploitation by a hacker. All the ADA in their stake pool smart contracts could have been drained and stolen – $200 million worth.
This would have been devastating both for Minswap and Cardano. So how in the world did this happen? Well, Minswap, of course, wrote the code and checked it over. They then had the code audited as a standard practice. Then they made the audits public and a helpful entity absolutely saved the day by finding the bug and then reporting it to Minswap instead of just stealing the money. Minswap has since fixed the issue and no users were harmed.
Now, I read through some technical docs and the bug basically would have allowed someone to duplicate pool tokens and steal money. The auditors somehow missed this and this really highlights how new and insane this entire space is. There are always brand new protocols popping up with exciting yields and features, and it might just be best to wait for others to be the guinea pig for you. Just in case. You just never know.
As we’re seeing here, even an audit can miss something. And either way, that issue is now fixed and Minswap actually holds more than 60% of the entire TVL on Cardano, really flying past all other DEXes. So TVL and the functionality of Cardano are growing, helping to push up prices. But that isn’t the only reason we’re going to cover the other Cardano catalysts. But first, tax season is here, and Accointing helps with the wild world of crypto tax.
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Now let’s do some rapid-fire Cardano catalysts that are helping to push up prices
Grayscale just launched a new fund for smart contract platforms, and it’s revealed that Cardano is the largest holding in the fund, making up more than 25% of the entire fund, a sign that smart money is really buying in on Cardano.
On top of this, Coinbase launched Cardano staking last month, improving both the accessibility and giving even more incentive for holders to hold long term. In the week after Coinbase announced staking, Cardano’s price surged 10%, of course, due to a combination of different exciting catalysts. Now the rates for Coinbase are around 3.75% APY with a lock-up period.
Now, we have a couple more rapid-fire events before the biggest news of all, there are several launches coming soon. Cardax is launching the first stable coin on Cardano, Djed. This launch is now scheduled for May. ErgoDEX is launching their test net on Cardano on the next hard fork upgrade, Vasil, in June. Throughout the history of Cardano, hard forks have been paired with very significant gains in price, which we can see highlighted. Thanks to Cardians on Twitter, the Vasil upgrade will have a focus on scalability.
And if you don’t really like Greek letters in your math, all you really need to know is that this upgrade will use a technique called Diffusion Pipelining that will help Cardano bump up transaction speeds while the network is building in popularity. Now, to the last and arguably most exciting update to Cardano. I’m surprised I haven’t seen more on this. It’s Milkomeda’s official launch. If you don’t know what that means, don’t worry. I don’t blame you.
What this means is Milkomeda has officially made Cardano EVM Compatible. Okay, basically what they’ve done is made it possible for Ethereum dApps or programs to be ported over to Cardano in a secure and easy way. This is massive for a few reasons. First, it opens up Cardano to a potential flood of new dApps to mess around with, but also because one of the bigger complaints developers have about Cardano is that it has a tricky programming language Plutus. This means developers familiar with Ethereum which most are in the world of blockchain can build in Ethereum’s code and deploy it on Cardano.
As time goes on we’ll see more and more launches happen this way. Overall, it’s a very exciting time for Cardano who decided to wake up from his winter nap. However, this isn’t all without saying that you shouldn’t always keep an eye on the projects you’re invested in and actually use them. Things can change extremely quickly in crypto.
One of the most important aspects to me is usability, if I use a blockchain and it’s easy and cheap I know others will likely think the same and it will grow over time. So keep an eye out for new Cardano dApps, test them out, check in on TVL every once in a while and see how Cardano compares to competitors now that their DEXes and other dApps are finally getting up and running. I can’t say it enough, this is such an exciting time for crypto. There’s so much changing and so many opportunities to just learn and invest and that’s going to do it for today.