1 Serious Mistake to Avoid With Cardano Right Now

There's a risk of making a serious mistake with Cardano (CRYPTO: ADA) right now, and by the looks of it, many investors have already fallen victim. The risk won't resolve itself for at least a little while, though establishing an exact timeline isn't possible at the moment.

What's this pitfall, and how can you avoid it? Answering the first question will answer the second as well, so let's dive in.

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This catalyst already came and went

On March 6, the White House issued an executive order calling for the federal government to establish a U.S. Digital Asset Stockpile, as well as a separate Strategic Bitcoin Reserve.

The reserve would hold Bitcoin. Other cryptocurrencies, including Ethereum, XRP, Solana, Cardano, and perhaps others would be stored in the stockpile. The implementation details of these two policies have yet to receive clarification, and it is presently uncertain whether there will ever actually be a reserve or a stockpile.

What the administration has said so far is that at least for now, the stockpile is intended to be filled with crypto assets seized via civil or criminal asset forfeitures rather than purchases on the open market. As with everything related to these policies, that may change, but it now looks like the administration does not intend to pursue approaches that would involve additional spending to boost any holdings in the stockpile or the reserve.

Furthermore, although its disposition could easily shift with time or under another administration, at this point these policies would direct the government to indefinitely retain rather than sell these coins.

It's no surprise that all of the coins named by the White House saw their value skyrocket. Upon the announcement, Cardano's price skyrocketed by more than 70%, as nobody in the cryptocurrency industry had expected that a relatively minor player might be included in the stockpile.

But then its price gave back the gains, and during the past 30 days, it's actually down more than 8%, which more or less matches its decline during the past three years

So even with the power of a strong catalyst out of left field, the coin still isn't performing well at all. And there will almost certainly never be another catalyst as strong as the asset being unexpectedly named as a part of the U.S. Digital Asset Stockpile.

For the coin's holders, that's incredibly bearish.

The long-term picture is not good here

The serious mistake that investors are at risk of making is buying Cardano now in the expectation that the stockpile will save the day and make its price go up. The way to avoid making that mistake is to simply not buy the coin.

It's favorable for the coin if the government opts to retain Cardano instead of sell, assuming it implements the stockpile -- and assuming the government ever comes into possession of a meaningful amount of Cardano, which it might not.

But that won't solve the problem that the coin lacks a coherent investment thesis at the moment. Its blockchain ecosystem is still much smaller and less diverse compared to Ethereum, the chain it was designed to beat.

It's also slower and more expensive to use than Solana, a chain that's also much larger, and which has a bigger and more diverse ecosystem of projects. As far as offering utility to holders, it has absolutely nothing that can hold a candle to XRP.

There is no rule that says Cardano can't fix those deficiencies over time and eventually rally, rewarding its longtime holders. Still, being in the stockpile will have little to do with that, and it hasn't shown much in the way of competitive promise so far on the other fronts.

It's likely that it won't ever recover to reach the high prices it fetched in late 2021, at least not anytime in the next few years, assuming there are no major changes to the chain's direction or its leadership.

So don't buy it, even if the government is willing to hold it.

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Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.