What is Cardano and how might a potential Coinbase listing help or hurt it?
If you follow the cryptocurrency market, you probably heard that there are 5 new coins Coinbase is thinking about listing on their exchange, CoinbasePro (rebranded from GDAX). They made an official announcement on their Medium blog on July 13. One of the coins they announced is Cardano and its’ cryptocurrency ADA.
The cryptocurrencies Coinbase might add are:
- Cardano (ADA)
- Stellar Lumens (XLM)
- 0x (ZRX)
- Basic Attention Token (BAT)
- Zcash (ZEC)
When I heard the news, my first instinct was to slap myself a couple times because I’ve been meaning to get into Cardano, 0x, and Stellar for months and have yet to pull the trigger. Then I decided to do as much due diligence as possible to try and determine which will be added to Coinbase. As well as which, overall, are the most promising projects. Because, let’s be honest, we’re all curious what will happen to the price of ADA if the listing occurs. Bitcoin Cash getting added to Binance resulted in a fiasco that resulted in an explosive rise in the price of the cryptocurrency. Followed almost immediately by a crash. But perhaps Coinbase has improved the process of listing new coins, they’ve already shown to be more transparent than last time being announcing the potential additions.
Sidenote: my personal experience with the BCH & Coinbase fiasco.
I remember the exact moment when Bitcoin Cash was listed. I invested a significant percentage of my portfolio into BCH a few months before the Coinbase listing. A couple weeks after I invested, BCW went on a strong bull-run. I didn’t sell, because I’m an idiot. Pretty soon I was in the red, at a loss on my initial investment. I held onto BCH because I’m stubborn and didn’t want to count the loss on my P/L. When I found it was listed on Coinbase, I was at the gym. If I wasn’t sweating enough from the workout, I sure was when I realized a coin I’d almost given up on was about to boom. I abandoned the friend I was spotting on the bench, his gargled cries for help a mere echo as my mind raced with the possibility of turning a profit. I sprinted to the locker room, shoving my dirty clothes in my gym bag, not once taking an eye off my phone. The BCH price moving rapidly every second. Realizing I might not have enough time to run home and transfer my BCH to Coinbase, I started the process on my phone. When it hit my Coinbase wallet, I market sold it all. My eyes practically glistened at the thought of the 10x I just caught. My happiness lasted about 30 seconds. That’s how long it took me to realize that Coinbase had crashed, and my orders weren’t going through. I tapped that sell button like my life depended on it, until it eventually went off, right at the breakeven point of my original investment. On top of all that, my friend didn’t talk to me for a solid two weeks.
I digress, let’s get started with ADA, one of the coins I see as most likely to be listed by Coinbase in the coming months.
Sidenote: I don’t own any Cardano, nor have affiliation with any of its team members. I plan on buying some in the near future, but wanted to share my opinion first. If any of the Cardano team is reading this — would love to interview you!
What is Cardano?
Cardano is a newer player in the smart contract space. It competes with Ethereum, but has a few key differences. It its’ own blockchain, and is building a decentralized network upon which developers can build dApps (Decentralized Applications). However it differs in intended use, the dApps best suited for Cardano (ADA) are for large organizations, companies, B2B businesses, etc.
Where Bitcoin facilitates the transfer of value, Cardano facilitates the development of decentralized applications.
The Cardano team is creating a new language called Haskell, which according to them, focuses more on mathematics in order to increase the security and reliability of the protocol. They also boast a “research-first” approach, claiming to put considerable time and capital into discovery and planning. In opposition to the more agile approach seen by other development teams in the space.
Of the coins potentially being added to Coinbase it has the second highest marketcap, which in my eyes makes it a strong contender for being added. It also has a relatively low price point, currently sitting around 17 cents. Retail investors lost their minds over the possibility of Ripple being added to Coinbase because it provided the opportunity to get into a cryptocurrency that they could buy large amounts of. The lower price makes it more appealing to the general Coinbase user.
Note: the same point on price can be extended to Stellar as well (I think Cardano, Stellar, and 0x are the most likely to be added, but that’s just my guess.
The Cardano team hope to solve the inefficiencies present in Ethereum, and as a result, build a better decentralized network.
Here’s an excerpt from their website explaining the cryptocurrency and its’ utility:
Cardano is home to the ADA cryptocurrency, which can be used to send and receive digital funds. This digital cash represents the future of money, making possible fast, direct transfers that are guaranteed to be secure through the use of cryptography.
Cardano is more than just a cryptocurrency, however, it is a technological platform that will be capable of running financial applications currently used every day by individuals, organisations and governments all around the world.
Whenever I hear about a company attempting to take on Ethereum I’m hesitant to get behind them. I’m a bit biased, Ethereum is the first blockchain project that drew me into the cryptocurrency world. I had heard about Bitcoin years ago but digital currencies didn’t seem extremely innovative to me, I grew up playing video games — the thought of digital currencies having value wasn’t difficult for me to grasp.
Ethereum on the other hand blew me away. I remember laying in bed on my laptop until 3–4 AM in the morning scouring Ethereum subreddits trying to learn more about the network. Since then, I’ve diversified outside of Ethereum substantially, and am not as much as a fan boy as I once was. But you’d be kidding yourself if you think that competing with Ethereum is an easy task. I honestly don’t know if anyone will truly beat ETH, but maybe there’s a chance for two competitors to exist in the space addressing different niches — similar to Uber and Lyft.
The first element I analyze when looking into would-be Ethereum competitors is their team. If they want to compete, they’re going to need a lot of credibility, experience, and support.
The Cardano Team
Since the ICO boom of 2017, we’ve seen a rise in projects with founders who have little-to-no experience with blockchain. We’ve also seen companies put people on their founding team to act more as figureheads than actual active members. A figurehead is an individual that adds to the credibility and marketability of the company, over adding value in day-to-day operations.
ADAs founder, Charles Hoskinson, is close with Charlie Lee (founder of Litecoin) and has a large network of heavy hitters in the crypto space. The Blockchain community is small, having a founder with an existing network can rapidly accelerate growth. He also used to work as the CEO of Ethereum — the fact that he left the current market leader in smart contract platforms for a competitor is a huge point in ADAs favor. Especially considering they claim to be able to solve the problems present in Ethereum. The claim holds a lot more weight knowing that one of the ADA founders experienced Ethereum’s shortcomings first hand.
Cardano utilizes an original Proof of Stake (PoS) consensus protocol called Oroboros. PoS is largely seen as the evolution of Proof of Work (PoW) and rewards users who “mine” through paying out interest. Making interest in PoS is called “staking”, when you “stake” your coins for a certain duration of time, they “mint” new coins that are added to your wallet. This is how the supply is increased. PoS has it’s downsides as well, but by and large is seen as an improvement upon PoW protocol due to the huge decrease in energy consumption needed to “mine” a coin using PoS. Ethereum is currently using a PoW consensus protocol, but ETH developers are working on implementing Casper Protocol which will switch the network over to PoS. In this sense, Cardano is ahead of the smart contract curve by already operating with PoS.
Data snapshot from July 24, 2018
Market Cap: $4,474,234,563
Circulating Supply: 25,927,070,538
Max Supply: 31,112,483,745
Current Price: $0.172570 USD/ 0.00002108 BTC
Starting Price (price when listed on exchanges): $0.02
All Time High Price: $1.28
% of Supply Sold in ICO: 58%
Monthly Traffic: 453,600
Twitter Followers: 143,000
Telegram Community: 13,092 members
Reddit Community: 66,700 subscribers
The Coinbase Effect
The question remains: what will Coinbase (potentially) listing Cardano do to the ADA coins price?
It’s hard to say, and I’d question anyone who made claims with absolute certainty. However, I’m of the belief that a Coinbase listing will bring substantial benefits in the long run.
This is complete speculation, but my guess is: when the coin is initially listed prices will skyrocket briefly as Coinbase users clamor to get the cheapest coin listed on the platform.
Once the price skyrockets, ADA holders will send their coins to Coinbase en masse, at which point a large dump will occur. Then, the traders who hadn’t gotten into ADA yet, but wished they had before the Coinbase news was released, will start to enter at the lower price created by the dump. This will bring the coin back up to around where it was when first listed.
I don’t believe the price action we’ll see over the first couple of weeks will reflect the long term effect of the Coinbase listing. There will be mania, some people will make a lot of money taking advantage of it, some people will lose a lot of money — just like when Bitcoin Cash BCH was listed.
What I do believe, however, is that the increase in volume Coinbase could bring to Cardano would create strong support for the coins value to expand in the future. I’m not as interested in ADAs price action the day it gets listed as I am in the price action it might see a year from then.
Coinbase has a large user base, more users equal more volume. More volume equals more liquidity, more liquidity means that this investment vehicle is now feasible to trade for institutional investors, as long as they have a custodial solution handy or, I don’t know, a Bitcoin ETF in the works that removes the issue of custody from their hands.
Coinbase is working on both a custodial solution for institutional investors and a Bitcoin ETF
Getting listed on Coinbase also means that the next time there is a influx of users as we saw when Bitcoin hit its last all-time-high of 20,000 USD, Cardano would be one of the easiest, and the cheapest coin they could invest in. Cardano is currently sitting around 17 cents, and its all-time-high is above a dollar. To me, this says that if Cardano were listed, it could see the increase in market cap necessary to bring it back to its previous highs.