Cardano (ADA +4.35%) is having a respectable run. During the past 12 months, it rose by almost 70%, and over five years, it has climbed by about 420%. It's no surprise that investors are wondering whether its next five years could prove to be even more profitable for those who hold it.
But could it really be a coin that mints new millionaires from modest stakes invested today? Let's crunch the numbers and map out the answer to that question.
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Could it grow enough?
Today, Cardano's market cap is about $20 billion. Mathematically speaking, turning a new $10,000 position into $1,000,000 means getting a 100-fold return, likely over the course of a handful of years. Applied to Cardano's current size, a gain of that size implies a roughly $2.2 trillion network value, which is about the neighborhood of Bitcoin's present market cap. That is a very tall order for a smart contract chain that is still fighting for its share of the market and which doesn't have any of the institutional adoption and integration with the financial system that Bitcoin has.
Financial institutions aside, crypto investors generally prize chains that attract large flows of on-chain dollars in the form of stablecoins, because those dollars enable the entire decentralized finance (DeFi) universe of services and projects, including borrowing, lending, payments, and other new decentralized applications (dApps). With more pooled fiat currency as liquid capital, there's more opportunity for developers, and with more developers, more projects, programs, and services end up launching, thereby attracting more capital from fresh investment as well as from users who are willing to pay. But Cardano doesn't really have a strong value-generating engine on that front as of now.
Whereas Ethereum (ETH +1.31%) and Solana (SOL +2.20%) already host deep stablecoin liquidity, Cardano's stablecoin base remains small at $35.7 million, which severely limits the number of capital-intensive financial apps that can thrive there today. For reference, Ethereum has $163.6 billion in stablecoins, and Solana has $14.9 billion.
Furthermore, measured by application revenue, Cardano generates low monetized activity on its chain relative to the leaders; in the 24-hour period ended at noon on Oct. 31, its dApps generated just $102,463 in revenue. Both Solana and Ethereum reported app revenue in the millions during the same period. In other words, there is some value on Cardano's chain, and significantly more than just a year ago, but it's still not yet at a scale that supports the leap to trillion-dollar valuation territory without a dramatic shift in adoption which is unlikely to occur, especially not overnight.
To be fair, Cardano has shipped meaningful upgrades that improve its chances. The Mithril initiative, for example, lets its nodes bootstrap themselves far faster. The chain's roadmap also lists work on decentralized signer registration and incentives that, if delivered, could reduce friction for users and developers. Don't worry too much about those technical details unless they interest you, just appreciate that the chain's progress with its core platform is real.
The open question is whether this progress results in a network that's both valuable and differentiated enough to win users and capital away from the bigger (and potentially also faster and cheaper) ecosystems that already have powerful network effects in their favor. There isn't yet to answer that question to the affirmative. That makes it hard to believe that it will make anyone millions.
Where Cardano might still earn its keep
Nonetheless, a coin doesn't need to be a millionaire-maker to be a worthwhile investment.
Cardano has a DeFi stack that is very small but otherwise functioning, with relatively consistent on-chain activity and a modest fee base that rises and falls with the market. If its scaling upgrades keep landing, and if more stablecoins migrate onto the chain, and if app developers have an idiosyncratic preference for Cardano's features or tooling, an investment in this coin could still become a multibagger over the course of a handful of years. The same could be also said of many other altcoins, of course.
That would still require better app quality, smoother onboarding, and most of all, a clearer niche versus Ethereum and Solana. Ethereum's head start in the size of its capital base and ecosystem, and Solana's head start in its high speeds and low costs, all remain formidable advantages which won't be eroded anytime soon. Cardano's bar to win new capital inflows is thus fairly high, and it could get even higher as those networks add to their technology, capital, and ecosystems.
Therefore, Cardano probably is not the coin to bank on for a 100-fold gain from here, even if it can still build wealth over time. Within the frame of it being a wealth-building tool, there are probably also a few better options with big names -- as well as many other options which are much worse.
