Is Cardano Still a Smart Long-Term Hold?

As one of the more serious altcoins in the crypto sector, Cardano (CRYPTO: ADA) has the shape of an asset that might be ripe for long-term holding. It certainly won't be going to zero anytime soon, and its team of developers isn't about to give up on their quest to upgrade the chain and make it a more appealing place to build applications.

But is it still a smart coin to buy and hold for years, or has the environment shifted to make its odds less favorable?

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Don't look to past performance to determine the future

Compared to its price five years ago, Cardano's price today is over 2,000% higher. It is easy to wish that its price will do the same if you buy it today and hold it for a similar amount of time. But that kind of thinking is folly.

For Cardano to be a smart purchase today, it needs to demonstrate why it's a better place to develop applications than its chief competitors, Ethereum and Solana, both of which are much larger. Beyond that, it also needs a high growth segment that's capable of drawing in capital from investors who are looking to invest in promising applications.

For example, if the chain were to capture a significant ecosystem of projects creating decentralized physical infrastructure networks (DePIN), artificial intelligence (AI) agents, or infrastructure projects for those agents to use, it'd generate demand for the coin, and thus send prices upward. Alternatively, its decentralized finance (DeFi) projects could flourish, or it could become an attractive hub for stablecoins to keep more value on its chain.

But the present looks uninspiring

But there isn't really any evidence of Cardano succeeding in any of those segments, especially not in comparison to its competitors. Its AI project ecosystem is so tiny that its total market cap is less than $1 million, which is to say it's nonexistent. In terms of its DeFi projects, its largest decentralized crypto exchanges barely turn over $2 million in volume in a 24-hour period.

In other words, Cardano's project ecosystem just isn't the place where developers are choosing to launch their projects in some of the most important emerging growth segments in the crypto sector. Meme coins and similar less serious segments are also underrepresented on the chain.

For these issues to change, a combination of things would need to happen. First, the chain would need to get even cheaper and even faster so that it could rival Solana. It'd also need to commit to a faster pace of tech development, shedding its slow-moving and deliberate reputation. Then it'd need to match its development roadmap to the features developers in the next set of growth segments would be looking for -- a challenging proposition, to say the least.

But the most challenging thing would be to get investors to believe that the coin's value is going to go up over time as a result of its superior leadership, budding ecosystem, and great tech. And that looks very far away right now.

The thesis does not look like it will play out from here

So Cardano is probably no longer a great choice to buy with the intention of holding for a long time, even if it once was. That could change over the coming years, but it is not wise to bet on.

Simply put, even when considered generously, the investment thesis for this coin is not very clear anymore. There isn't much hope for regulatory catalysts to save the day, nor are there many drivers in favor of the coin gaining in value compared to where it is now. There does not appear to be a strong reason why the coin is worth holding on to when comparing it to faster, cheaper, and larger chains like Solana, which also have richer project ecosystems, especially in the aforementioned growth segments. That should frighten you if you're a holder.

The odds of Cardano going to zero are not very high, as it has an established community and at least some capital that's committed to the chain, even when it isn't performing well. Still, if you're actually looking for growth, even being very patient is not probably going to make this into a good investment.

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cardano. The Motley Fool has a disclosure policy.