Cardano faces a renewed round of criticism, after renowned analyst Ali Martinez — known by his X handle Ali Charts — argued the valuation of the network is out of sync with its actual usage. The analyst’s thesis is simple: unless the adoption rate improves, ADA’s price may face a lot more decline if a crucial support level falls.
You can read the post entitled “The Most Useless Network in the Crypto Market,” Martinez framed Cardano is a blockchain with an enormous market value, but relatively weak onchain momentum. He wrote: “Cardano ranks among the largest cryptocurrencies by market value, yet the level of real activity on the network remains relatively small.”
Cardano Could Fall another 80%
Then he argued that DeFi involvement was directly related to that. “the amount of capital locked in Cardano’s DeFi ecosystem has never exceeded $1 billion, and it has historically been only a fraction of what is locked on competing platforms like Ethereum. Even some newer chains, such as SUI, have already surpassed it in usage.”
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His bearish argument is centered on the gap between network activity and valuation. Martinez claimed that the gap between valuation and network activity is at the heart of his bearish case. “a network is valued in the billions but only a limited amount of capital and applications are actually using it, the price may be driven more by speculation than by real demand.” Cardano is yet to achieve the durable product-market-fit that tends towards long-term investment in crypto.
Cardano was compared to two other ecosystems, which, according to him, had already established clearer roles on the market.Unlike Ethereum, which has built a dominant position in DeFi, or Solana, which has captured high-speed consumer applications, Cardano still lacks a clear use case that consistently attracts users, developers, and investors,” He wrote. Cardano was smaller than these chains but it has yet to lock in a specific sector as the destination of choice for its activities.
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Martinez has also pointed out Cardano’s model of development as a constraint. “Another concern for me is the pace of development and the increasingly competitive environment,” He said. “Cardano follows a research-driven model that prioritizes academic review and formal verification. While that approach can improve security and design quality, it has also resulted in a slower rollout of features compared to other blockchains.”
This slower cadence had compounding effect, according to him. “Although Cardano launched in 2017, smart contracts were not introduced until 2021, giving competing ecosystems several years to build stronger network effects with more developers, applications, and liquidity.” When it comes to cryptography, network effects that can self-reinforce themselves can make arriving at the key product layers late as crucial as design.
This thesis is based on a single chart level. Martinez stated that $0.245 was the crucial support level to be watched. Martinez said that $0.245 is the critical support to watch.
The breakdown was not a foregone conclusion, but he did note that it could happen. “has not yet occurred,” But traders who are waiting to see what happens if this level doesn’t hold could still get a good setup, assuming the risk is managed well.
ADA was trading at $0.2668 as of the time this article went to press.
Featured image was created with DALL.E chart by TradingView.com
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Source: www.newsbtc.com
