As the FOMO-Driven Rally in Cardano’s ADA Coin Reaches a Fever Pitch, Expect a Correction
Cardano, a blockchain platform powered by the ADA coin, is attracting quite a lot of attention recently on the back of the coin’s 1,400 percent plus gain so far this year. With Cardano’s much-anticipated Alonzo upgrade in the rear-view mirror now, some analysts are warning that ADA might be ripe for a correction.
As a refresher, Cardano is operated by a non-profit foundation that interacts closely with academia to research and improve all aspects of the blockchain platform. Cardano calls its ADA coin the “first third-generation” cryptocurrency, having the ability to solve the scalability and interoperability dilemma associated with previous-gen coins, including Bitcoin and Ethereum.
Cardano’s Ouroboros algorithm utilizes a Proof of Stake authenticating mechanism where a collection of nodes is manned by a “leader” who validates transactions and then incorporates those transactions into the Cardano blockchain.
Each major update to the Cardano network is peer-reviewed, thereby ensuring optimal execution. Moreover, the platform’s layer-2 scaling solution, known as Hydra, would boost its processing power to as much as 1 million transactions per second! This means that Cardano would be able to process 10x as many transactions as those processed by Ethereum 2.0.
This brings us to the crux of the matter. The recently implemented Alonzo upgrade, which introduced the smart contracts functionality to Cardano, set the stage for a fierce rally in ADA, with the coin forming a new all-time high amid expectations that the platform would become the next “Ethereum Killer.”
As with most cases of wild momentum and FOMO-driven rallies, the internet was soon abuzz with wild price targets, with some suggesting that Cardano’s ADA coin would soon hit $100! For context, the coin is currently trading at the $2 handle.
Predictably, some analysts took exception to these wild FOMO-driven price targets:
Shows FOMO to me.
— Michaël van de Poppe (@CryptoMichNL) August 23, 2021
Bear in mind that should ADA reach $100, its market capitalization would be worth $3.21 trillion. For comparison, Bitcoin currently has a market cap of a little over $900 billion.
As is evident from the recent momentum-driven plays, Cardano’s ADA coin is now ripe for a correction. I wouldn’t be surprised if the coin were to retest major support around $1.69 - $1.87 area.
Long-term though, ADA’s prospects remain quite bright given Cardano’s transaction processing advantage as well as entry in booming dApps – applications that run on a decentralized computing system such as a blockchain – sphere on the back of August’s Alonzo hard fork.