Cardano Founder Claims ADA Will Surpass BTC and ETH: Empty Boast or Real Possibility?

Last week (8/21-8/27), the cryptocurrency market experienced narrow fluctuations and saw a recovery from the previous decline.

The total market capitalization remained around $1.05-1.06 trillion with very small upward or downward movements. The support at $1 trillion is still holding.

However, the market sentiment index continued to decline, reaching a low of 37 on August 23, the lowest level since January (38), indicating increased panic. Currently, with the market's recovery, the panic index has rebounded to 39.

Crypto Total Market Capitalization (yellow) and Fear Greed Index (blue) trend from January 1, 2023, to August 27, 2023; Source: MacroMicro.

Major cryptocurrencies as a whole have still been in a downtrend, but the magnitude of the decline has decreased, and some have even turned from bearish to bullish, showing signs of stabilization and potential rebound.

Change in value of major cryptocurrencies from August 21, 2023, to August 27, 2023; Source: MacroMicro.

Bitcoin Cash (BCH) performed the best with a 6% increase, followed by Binance Coin (BNB) with a 4% increase.

Stellar (XLM) and Chainlink (LINK) performed the worst, both declining by about 3%.

Bitcoin (BTC) had a volatility of 0, with its market share increasing by 0.3% to the current 48.3%. Ethereum (ETH) price declined by 1%, and its market share slightly decreased by 0.2% to maintain 18.9%.

On August 26, 2023, Charles Hoskinson, the founder of Cardano (ADA), spoke at the Rare Evo 2023 conference in Denver, USA, predicting that ADA will surpass BTC and ETH to become the largest cryptocurrency by market capitalization.

Cardano founder Charles Hoskinson; Source: Rare Evo.

So, what does ADA have to surpass Bitcoin and Ethereum? Charles Hoskinson analyzed the shortcomings of BTC and ETH in terms of sustainability, scalability, and interoperability, and pointed out the advantages of ADA.

Charles Hoskinson believes that the governance of Bitcoin and Ethereum is highly inefficient, while Cardano is committed to developing decentralized decision-making and governance, which will contribute to its future surpassing them.

Furthermore, Charles Hoskinson emphasized the recent Alonzo upgrade of Cardano, which introduced smart contract functionality to the Cardano ecosystem, attracting developers to build various DApps and DeFi applications, thus expanding the ecosystem and market scope.

Regarding the future of Cardano, Charles Hoskinson confidently stated, "I think it (ADA) will be much more than a cryptocurrency. I think it's going to be a new digital nation, a pillar for a new society—a place where we can finally start trusting each other again, a place where we turn from 'do no evil' to 'can't do evil.'"

According to data, ADA currently has a market capitalization of $9 billion, accounting for 0.87% and ranking 7th globally. In contrast, BTC has a market capitalization of $500 billion, accounting for 48.3% and ranking 1st globally, while Ethereum has a market capitalization of $197.1 billion, accounting for 18.87% and ranking 2nd globally. 

Top ten cryptocurrencies by market capitalization, Source: CoinMarketCap.

This means that ADA would need to increase its market capitalization by approximately 20 times to catch up with ETH and by 55 times to catch up with BTC. Is this situation possible?

Based on the arguments of the Cardano founder, decentralized governance and ecosystem development will be the driving force behind ADA surpassing BTC and ETH. However, these arguments may not hold water, especially when it comes to decentralized governance, which is abstract and not necessarily enough to surpass Ethereum. Real products and corresponding data are needed.

Currently, Cardano's total value locked (TVL) is $160 million, while Ethereum's TVL is as high as $210 billion, which is about 130 times higher. This means that even if Ethereum remains stagnant, Cardano's TVL would need to increase by 130 times to catch up, not to mention that Ethereum's development is becoming increasingly popular in the market. 

Overall, Charles Hoskinson's claim of surpassing BTC and ETH may be a bit exaggerated, as ADA currently has yet to demonstrate comparable qualities.

On August 17, Bitcoin experienced a significant drop to $25,000, followed by a slight rebound. On August 22, BTC fell again and retested the support at $15,000, followed by a rebound the next day. However, it failed to sustain the rally and break through.

Bitcoin price chart from August 2022 to August 2023, Source: TradingView.

Currently, BTC is fluctuating within the range of $25,000 to $26,800 with less than a 1% movement, showing no clear direction from bulls or bears. However, the overall trend is bearish, and the longer it lasts, the more unfavorable it becomes for the bulls. Additionally, with the release of non-farm payroll data on September 1, there could be momentum for the bears to exert their influence, giving them an advantage.

Bitcoin 4-hour price chart, source: TradingView.

In the current environment and trend, although it leans towards bearishness, it has not yet broken the strong support at $25,000. Therefore, it is advisable to adopt a "bearish bias without shorting" strategy, unless it breaks below that level, which may be an opportunity to consider shorting.

If you can't resist the urge to open positions and want to take action, you can try a small long position, but with conditions. From a risk-reward perspective, it may be more beneficial to go long at this level and seek a rebound. 

Of course, it is best to wait for the third retest around $25,500 before considering a long position, with a stop-loss at $25,000. If it does not occur, it is better to refrain from opening positions and observe patiently.