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6 Reasons Cardano is Uninvestable (And What We’re Learning From It)

Note: This article is written for informational purposes only, and does not constitute investment advice or a solicitation to buy any Address Capital services or products.

October 19, 2021 Update: We added IntoTheBlock’s definition of being a long-term holder.

Cardano is uninvestable as anything other than a vehicle of speculation.

And for those new to the token space, consider the below before succumbing to Cardano’s outstanding marketing efforts.

1) Cardano has (essentially) no live applications.

Decentralized application protocols (“L1s” or “Blockchains”) are firstly defined by the number of applications using them.

In Cardano’s case, there are essentially zero.

Source: CoinGecko and Internal Analysis, September 2021.

2) Cardano’s valuation is beyond absurd.

There are several ways to value an L1, including Metcalfe’s Law, which states that the value of a network is proportional to the squared number of its participants.

If we look at the number of Non-Zero Balance wallets denominated in the Blockchain’s native currency as a proxy for network participants, Cardano is overvalued by 1,587%.

Note: Market Capitalizations calculated based on total outstanding token supply. Source: Messari, Coingecko, Etherscan, BSCScan, Polygonscan and Internal Estimates, September 2021.

3) All projects on Cardano are funded by Cardano.

The longevity of an L1 is defined by the diversity of its application development teams and funding. In Cardano’s case, EVERY project mentioned on its website either has the Cardano Foundation as an investor or is built by IOHK, the for-profit development firm founded by Cardano’s Founder. [1]

4) Cardano’s partnerships are underwhelming.

Cardano recently announced two “high profile” partnerships at the Cardano Summit 2021: Chainlink and Dish Network. [2]

Partnering with Chainlink says everything about Chainlink’s market dominance as an oracle service for the token economy (Chainlink’s partnership list is massive) versus anything special about Cardano .

Furthermore, the Dish Network partnership announcement included virtually no details associated with it.

And based on the fact that the only person from Dish involved appears to be its Head of Innovation, it’s almost a near certainty that whatever work that takes place will be stuck in enterprise blockchain purgatory and never see the light of day.

5) Cardano’s development progress is nonexistent.

Four years after launching in 2017, Cardano finally launched smart contracts and the first application that attempted to use it immediately shut down. [3]

For context, Ethereum has had smart contracts functionality since 2015.

6) Cardano has a short-term investor base.

Using IntoTheBlock’s definition of long-term (longer than one year), only 9% of Cardano holders are long-term holders compared to 63% for Ethereum. [4]

Conclusion

Notwithstanding the above, we are impressed with the impact of Cardano’s marketing efforts, and are working to incorporate the quantitative impact of speculation within our broader valuation methodology.

Because while Cardano is uninvestable for us, many have earned tremendous returns from its price action, and we’d be short sided not to learn something in anticipation of future outperformance within the token economy.

Sources

[1] Cardano, September 2021.

[2] Kevin Reynolds, CoinDesk, September 2021. Cardano Announces Partnerships.

[3] Tim Hakki, Decrypt, September 2021. Where are the Cardano Apps?

[4] IntoTheBlock, September 2021. Cardano Long-Term Holders.

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Actively Managed Liquid Token Investments @ https://www.address.capital/

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Liquid Token Investing at https://www.address.capital/ and writing at https://medium.com/addresscapital

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