Cardano is a DeFi platform and is currently seeing an unexpected rise in investments. However, the price of ADA, the native token of the Cardano blockchain isn’t moving much. This gives rise to a very important question. Why, despite its rapidly growing popularity and DeFi ecosystem, the ADA price not appreciating that much.
Let’s discuss a few important factors behind the stagnancy of ADA in price, especially when compared to other DeFi projects and their native tokens.
More About TVL
TVL represents the total amount of funds bound in a smart contract. Smart contracts are essential for the proper functioning of the DeFi sector. So, TVL directly represents the interest of investors and the general public in a DeFi project.
Why is Cardano’s TVL Surging?
Cardano’s TVL has been increasing since the mid of February 2023. One of the possible reasons behind this can be the introduction of new projects by the developers of the Cardano DeFi platform.
Investors are flocking to invest in Cardano and get high ROI in the upcoming years. It is also notable that the gas fees on Cardano transactions are much lower than on Ethereum. These factors make Cardano an attractive investment for crypto investors.
The unique POS (proof of stake) mechanism of the Cardano blockchain encourages users to lock up their assets on the blockchain for the long term for better rewards. This encourages more users to lock up their assets on Cardano’s DeFi platform. This is how the TVL of Cardano is rapidly increasing.
ADA’s price is still stagnant even though its DeFi ecosystem is thriving. This is in contrast with Ethereum and other DeFi ecosystems, whose native tokens appreciate increasing stakes in the DeFi ecosystem. According to analysts in the crypto space, Cardano’s price stagnancy might be resulting from the project’s focus on long-term investments.
The slow progress of the Cardano platform might be another reason why investors are hesitant to invest in ADA. This is why ADA’s price is still stagnant despite the continuously increasing TVL of its DeFi platform.
Can Cardano Bridge the DeFi Gap?
Cardano is a reasonable contender in the DeFi sector. However, the platform must resolve its issues before transforming itself into a good DeFi platform. The resolution of the slow development pace and fulfillment of its promises can help Cardano rise to the top.
If Cardano continues to progress steadily like this in the upcoming years, it can challenge ETH’s dominance in the crypto sector. The platform will need to transform its leadership structure, and deliver on its promises to materialize this dream in the upcoming years.
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