Tech upgrade is the most important factor behind when cardano will blow up. For example, the Mithril upgrade completed in June 2023 made the node synchronization five times faster (from 4 hours to 48 minutes). It has increased the TPS (Transactions per second) of the Cardano network to 1,000 from 250 and reduced the execution cost of smart contracts to 0.15 ADA (approximately 0.05 US dollars) per transaction, which is 76% less than Ethereum Layer2’s solution. If the Leios expansion solution that was published in the first quarter of 2024 is implemented successfully, the theoretical TPS can be up to 1,500-2,000, and its processing efficiency will be greater than Solana (the current TPS is 650), which will make developers cross-park – so far, 127 dapps have been built in the Cardano ecosystem. However, the TVL is only 210 million US dollars. If the TVL increases to 1 billion US dollars after a technological innovation (accounting for 0.8% of the public chain market), the price of ADA can break through 1.5 US dollars (currently 0.45 US dollars).
Ecological explosion can be an accelerator of when will cardano explode. In 2023, the sales of NFTS on the Cardano chain reached 320 million US dollars, increasing by 430% year-on-year. Among them, JPG Store occupied 75% of the market share, and the daily volume of trades increased from 50,000 to 230,000. If the trading volume of its DEX (decentralized exchange) Minswap exceeds 1 billion US dollars (currently 470 million), and the depth of liquidity pool increases by 300%, it may wake up the demand for ADA. According to the numbers of the on-chain analytics platform Messari, of the current 35.1 billion ADA circulating, 64.5% are staked shares, representing an annualized yield of 5.2%. So much greater than Ethereum’s 3.8%. Apart from this, if the Ethereum-based blockchain education collaboration initiative with the government of Ethiopia (for 5 million students’ digital identities) is pursued, it would bring in a minimum of 2 million new on-chain addresses to the network and increase the network activity from the existing 83,000 average daily transactions to 500,000 daily transactions.
Regulatory forces may accelerate when will cardano explode. If the US SEC approves the Bitcoin spot ETF in 2024 and deems ADA as an eligible trading target (with a probability of about 35%), analogously to the size of Grayscale Bitcoin Trust (GBTC) (24 billion US dollars), the institutional fund inflow can raise ADA’s market capitalization from the current 16 billion US dollars to 40 billion US dollars. Meanwhile, with the addition of Cardano to Hong Kong’s white list of tokens in tradable assets in June 2023, the territory’s share of trade in Asia rose from 12% to 27%. If the pilot program opens within the Chinese mainland, to mention the 180% spike seen by Bitcoin upon the reversal of the “ban on mining” in 2020, ADA could do the same. However, caution needs to be exercised against the risk involved such as the LUNA crash in 2022 – the close relationship of Cardano and the algorithmic stablecoin Djed (the current collateralization ratio of 380%) can trigger a liquidation crisis in the event of extreme market conditions (such as ADA’s one-day fall of 30%) that will result in a 40% decline in TVL.
Market sentiment and cycle trends also affect the window period of when will cardano explode. Historical records show that ADA rose by an average of 320% in the first half of the halving cycle (the next one is expected to be in April 2024), but it only rose by 58% in 2023, dampened by the bear market. If Bitcoin breaks its previous high of $69,000 in 2024 (with approximately 55% probability), on the basis of the CoinMetrics correlation model (90-day price correlation coefficient of ADA with BTC is 0.87), ADA could follow up with it to the range of $1.2- $1.8. Further, 2.1 billion ADA are held by the Cardano Foundation (accounting for 6% of total supply). If it starts a quarterly burn mechanism like BNB (assuming every quarter, 20% of transactions are burned), its deflation rate would be 1.8% per annum, driving its market capitalization ranking from the 8th position to the top 5. But it is worth mentioning that its research and development budget (annual investment of 40 million US dollars) is merely one-third of that of Solana, and the lack of sufficient ecological incentives might restrain the scope of break-throughs.