Cardano (ADA-USD), is now the 8th largest cryptocurrency by market capitalization, according to Coinmarketcap.com. That gives ADA crypto a market value of $29.3 billion. But so far this year it’s not done very well for investors.
However, that could change on a dime, when markets begin to rebound. If the market-related turmoil from the Ukraine war ever resolves itself, ADA crypto could easily double to where it used to trade.
Nevertheless, the sad fact is Cardano has been in a tailspin for the last six months. ADA crypto peaked at $2.9682 on Sept. 2, 2021. By March 4 it had dropped to below $1 at 86.54 cents. This is a drop of 70.6% over the last six months. In other words, it is at less than 30% of its price six months ago.
That is more than a correction. It’s more like a massive depression. But that kind of volatility is par for the course with many cryptocurrencies. Investors should be accustomed to this. They have to expect this.
I saw a funny ad on TV about this recently. An insurance company put on a skit where an office worker stood up waving his hands yelling, “I’m a millionaire.” He was just about to quit his job when he looked at his computer again and sat down. His boss came by and consoled him saying something like, “That’s what happens with cryptocurrencies.”
Obviously, the best way to manage this type of investment is to have an average cost plan. Never put your whole allocation for cryptocurrency investment in at any one time.
Where This Leaves Cardano Now
Cardano is a proof-of-stake cryptocurrency — i.e., it does use mining like Bitcoin (BTC-USD). It was designed to be a more efficient platform than Ethereum (ETH-USD) for specialized functions. These include processing smart contracts, other related types of decentralized applications (Dapps), and decentralized finance (Defi) contracts.
As it stands, Cardano began to allow smart contracts to be processed on its platform in September 2021. This upgrade initially helped to push the ADA crypto to its peak.
It was known as the Alanzo fork. The upgrade allowed smart contracts through a software language called Plutus scripts. It is “a purpose-built smart contract development language,” according to the team that built the hard fork.
But since then, it started to depreciate when it was clear there was a lack of developers to produce new Cardano-based smart contract apps and non-fungible tokens (NFTs). After that, the year-end market sell-off and then the Ukraine crisis took ADA crypto down to its extremely low level now.
Last month I wrote that ADA crypto looked cheap based on the number of wallets that had taken Cardano into the wallets or in smart contracts. The number of wallets holding Cardano could have increased by now and this could make ADA crypto even more undervalued.
This is evidence that the crypto could be slowly gaining popularity. But the problem is that ADA crypto has fallen so far so fast that a good portion of that enthusiasm may be gone. People may have left or sold their Cardano assets in their wallets.
What To Do
Investors should only invest in this highly volatile cryptocurrency if they have the wherewithal to lose it all or close to that. For example, even though ADA crypto is down over 70% from its peak, there is nothing that could prevent it from falling another 50% or more.
As I wrote in my last article:
“The lesson to learn from this is that there is no way to determine the long-term bottom in a cryptocurrency. There are only tangential indications of value. For example, if more people find the cryptocurrency useful their demand for the tokens will rise.”
This applies now more than ever as ADA crypto continues to drop. The truth is that once the market rebounds, it is possible that once the market turmoil passes, ADA crypto could see a major turnaround.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.