Cardano (ADA) has benefited from a market filled with bullish exuberance, exploding in price from under US$0.03 to US$0.41 in less than three months, a gain of over 1500%. The market cap currently stands at US$13.11 billion with US$96.56 million traded over the past 24 hours.
ADA seeks to incorporate the best of every possible coin including Bitcoin (available on Coinbase), Ethereum (available on Coinbase), PeerCoin, DASH, and Bitshares through an act they call the “shameless theft of great ideas.” Development began in 2015. The project presold tokens in Japan from 2015-2017, where 26 billion tokens were sold for US$0.0024 each. Public trading began on October 1st, 2017. There is a hard cap of 45 billion ADA in total, 13.88 billion of which will be issued through further coin creation.
The team includes three conglomerates which hold 5.18 billion ADA between them; the Cardano Foundation which aims to standardize, protect, and promote ADA; Emurgo which aims to develop, support, and incubate commercial ventures; and Input Output Hong Kong (IOHK), founded in 2015 by Charles Hoskinson and Jeremy Wood. IOHK also works on Ethereum (available on Coinbase) Classic development and focuses on research and development in cryptography and distributed systems.
The team states that Blockchains (layer one) have an inherent scaling problem. In their current form, they require every node to hold and save a large amount of data with every block. Even without a block size limit, like Ethereum (available on Coinbase), blockchains tend to crumble under heavy load – look to ICOs and Cryptokitties as examples.
ADA’s solution is to start with a layer one dubbed the Cardano Settlement Layer (CSL) while adding a layer two, Cardano Computation Layer (CCL), to mitiGate the scaling problem. CSL will support two scripting languages as well as sidechains.
ADA further aims to tackle a formal process to debate changes in decentralized platforms. The issue here can clearly be seen in the Bitcoin (available on Coinbase) scaling debate, which leads to a fractured community and can create maligned incentives.
The ADA solution is to use a Proof of Stake (PoS) solution dubbed Ourobouros, which is soon to be DeleGated PoS (DPos) as can be found in Bitshares. DPoS allows for stake pools, which combine the total stake of individuals and increases the probability of receiving stake rewards.
PoS allows for social consensus and secure voting on peer-reviewed protocol proposals. The end game is a type of constitution which is updated when needed, allowing for an easily upgrADAble network without rocking the boat.
The ADA team also recognized the need to work with regulators in many countries when and where applicable. The developers emphasize the importance of secure and reliable metADAta, to “anonymize and disintermediate central actors.” Bitcoin (available on Coinbase) and its contemporaries have discarded the need for stable identities, metADAta and reputation in commercial transactions, the team states. Adding this data through centralized solutions removes the auditability, global availability and immutability “which is the entire point of using a blockchain.”
The ADA platform is launching in three phases; the testnet era, the bootstrap era, and the reward era. Currently in the bootstrap era, IOHK and the Cardano Foundation have trusted nodes operating the network, albeit in a centralized manner. A truly decentralized PoS blockchain will not begin until the reward era, which will also include a decentralized treasury to fund proposals. This treasury is similar to many other coins, like DASH and PIVX. However, further details of how the reward era will operate have yet to be released.
The roadmap also consists of three updates; Goguen, Basho, and Voltaire. These will integrate smart contracts, performance improvements, and the treasury and governance system respectively.
Trading volume is led almost exclusively by the Bitcoin (available on Coinbase) (BTC) pair on Bittrex, where the coin debuted. Despite the ICO occurring almost solely in Japan, there are currently no Yen (JPY) pairs.
Technical Analysis
When a coin is young, as is the case with ADA, lower time frame charts will inherently need to be used. In doing so, the analysis itself has a lower probability of providing accurate signals. To access the USD pair on TradingView, type “ADABTC*BTCUSD” in the ticker symbol box.
After breaking the initial listing high on November 28th, ADA has made two drives followed by extended consolidation. The second high occurred on lower volume and lower momentum, known as a bearish divergence. The asset has since essentially reset, after pulling back and touching 50 on RSI.
When consolidation has completed following the current drive, a third drive based on diagonal resistance projects a target of US$1.90. The third drive may occur on even less volume and momentum than the second drive, resulting in a 50% pullback to ~US$0.97.
The Ichimoku Cloud on the four hour chart, using doubled settings (20/60/120/30) for more accurate signals, shows a definite uptrend albeit with mixed metrics.
The Cloud uses a moving-average-type system with dynamic support and resistance to make projections of key zones, as well as capturing 80% of any given trend. As long as the price remains above the Cloud, sentiment remains bullish. Price in the Cloud indicates a neutral trend, and below the Cloud indicates a bearish trend.
When the Tenkan (blue) is over the Kijun (red) sentiment is bullish, as shown below. When the Kijun is over the Tenkan sentiment is bearish. When the Lagging Span (dark green) is above the Cloud and current price sentiment is bullish, as shown below. When the Lagging Span is below the Cloud and current price sentiment is bearish.
The best entry signals when using this indicator occur when the trend is obvious, but 1 or 2 of the signals have yet to become confluent on a higher timeframe trend.
The Cloud is currently bullish; the price is nearly above the Cloud, the TK cross is currently bearish, and the lagging span is below price but above Cloud. A long entry signal would occur on a Kumo breakout and bullish TK cross.
There is also a low timeframe bullish continuation chart pattern, a bullish pennant, with a measured move and 1.618 fib extension target of US$0.77.
On the two hour chart, the 50 and 200 exponential moving averages (EMA) have provided sTron (available on Binance)g support over the past few months. A candle close below the 200 EMA would be a sTron (available on Binance)g bear signal and long exit signal. An ensuing 50/200E MA bearish cross would also be a sTron (available on Binance)g exit signal for long positions.
Lastly, the ADA/BTC pair on the four hour chart also shows a sTron (available on Binance)g bullish trend. The Ichimoku Cloud signals are holding bullish after an ADAm and Eve double bottom reversal, which lead to a Kumo breakout and all time highs.
There is a long flat Kumo at 1890 satoshis, denoting both sTron (available on Binance)g support and a 50% retrace target. Expect the price to reach for this level to test as support should a candle close within the Cloud.
Conclusion
In an environment flooded with hundreds of alternatives, the ADA thought process is sorely needed for evolution in the space. ADA has the benefit of seeing how big problems fail – especially scaling – and are attempting to incorporate solutions proactively.
However, there are currently zero PoS coins with transaction volumes comparable to Bitcoin (available on Coinbase) or Ethereum (available on Coinbase). While Ethereum (available on Coinbase) is moving toward PoS, the idea that the protocol change will one day save the ill-gotten-gains of PoW is still purely experimental conjecture.
Technicals are at the mercy of the greater cryptocurrency market at large. Being listed 6th by market cap and being under US$1.00 per coin has immense advantages in attracting new buyers in the space. A third drive above US$1.90 and speculative mania driving this above US$10.00 are probably equally possible.