In today’s Deep Dive we take a dive into Cardano (ADA) data. In recent weeks, we have seen interesting developments on the popular altcoin network. So it rose Decentralized Finance (DeFi) use hard and we see several records being broken. In addition, the network continues to develop strongly from a technical point of view. What do we see on-chain and what does this mean for the price of ADA? Join us in today’s Deep Dive.
Recent Developments Cardano (ADA)
Before diving into the data, let’s take a look at some of the major developments that have taken place on the Cardano network in recent weeks, as the popular blockchain project has shown strong growth.
Hydra Head goes live on Cardano
Hydra Head is a new tool on the Cardano network. The tool makes it possible to process transactions even faster and has gone live in recent weeks. Hydra Head makes it possible to use a mini database in addition to the main blockchain on which a small group of users can communicate with each other. This can be done at a fast pace and at a lower cost. It shows that the network is becoming increasingly competitive against other popular blockchain projects.
DeFi ecosystem on Cardano is developing rapidly
A new update on the network has greatly helped the DeFi ecosystem on the network. The update, developed by Input Output Global (IOG), improves the functioning of Djed stablecoin. A good stablecoin is important for a DeFi ecosystem because it allows users to establish stable liquidity pairs. This can potentially attract more equity, which is good for network adoption and possibly share price.
A dive into the data
The use of DeFi on the network is increasing significantly. With the launch of the goguen phase in September 2021 came smart contracts available on the network. Since then, development has gone fast and the DeFi community is starting to flourish on the network. In this section we take the on chain data to see how the adoption is progressing and what we can expect.
On-chain analysis Cardano
We’re grabbing a few different types of on-chain data to reflect the strong growth in DeFi. First, let’s look at the network in general. Figure 1 shows the transaction volume on the Cardano network over the past 4 months. This shows a clear trend growth. For example, the number of daily transactions increased by 205% compared to the beginning of the year and we recently saw a new 3 monthly peak in transactions with 98,000 transactions in a day.
Although this is still a lot less than what the Ethereum (ETH) network shows (for example, the largest altcoin project has an average of one million transactions per day), it does mean that the adoption of the network is increasing.
DeFi popularity is exploding on Cardano network
If we look further at the DeFi usage, specifically we see that it is also growing considerably. Figure 2 shows the amount of ADA that is locked into different DeFi protocols. This is also called Total Value Locked (TVL). Because the execution of smart contracts is relatively new (September 2021) on the network, we have only recently seen the execution of decentralized exchanges and the increase in the TVL value.
In March 2022, the total ADA locked in protocols rose to a local peak of 300 million. It then moved almost sideways for almost a year until recently. In 2023 we will see a remarkable growth in the adoption of DeFi use. The TVL value is rising fast and flying past the 300 million ADA tied up in DeFi protocols. Meanwhile, we see that the network is well on its way to achieving a TVL of 500 million coins. This makes it clear that the DeFi sector of the Cardano network is growing in popularity.
Whereas TVL mainly shows how much confidence users have in the decentralized protocols on the network, figure 3 shows the weekly trading activity on decentralized exchanges. From this we also see a strong increase in recent months, and in particular the last weeks.
A week ago, trading volume rose to $80 million, up from $40 million the week before. In the current week, we see that usage is on track to push past $100 million. It shows that users are more and more active on a daily basis. The growth and adoption of the network is very impressive and shows that users derive benefit from the applications that Cardano has to offer.
Price analysis ADA
In the previous section, we clearly saw that the adoption of the network has increased significantly in recent months. How does this behavior relate to the price of the popular altcoin project? In this section we briefly analyze the price development. In Figure 4 we see the price development of the past 90 days. Remarkably, the price has remained fairly stable during that period, as it was still around $0.35 90 days ago. 90 days later, not much has changed and the coin is a few percent above a valuation of $0.35. It suggests that the increase in demand for ADA has not yet affected the share price. However, if the DeFi market on Cardano continues to grow, a positive development of the price is increasingly likely.
Although the cardano price has remained relatively stable in recent months, we are seeing a remarkable rise in the use of DeFi. For example, more and more coins are locked up in various decentralized protocols and we see that daily activity is rising sharply.
The increase in use also means an increase in the demand for ADA. After all, users must use the coin as a liquidity partner for decentralized exchanges and use the token to pay network costs. The strong increase in demand for the currency may eventually result in an increase in the price.
As long as usage on DeFi continues to increase, it is expected that the price will follow at some point. Nevertheless, we see that the price remains stable at the moment, which suggests that the market is still in a wait-and-see mode, possibly suffering from the macroeconomic uncertainty in the overall market.