Unless one has been living under a rock, you would have at least heard about the FTX-Alameda bankruptcy scandal, which caused widespread mayhem among crypto investors and crushed crypto prices.
Under such circumstances, one would expect the crypto market to see a setback and for wallet addresses to be declining as investors sell their coins to take cover. Indeed, this has happened with the big name coins like Bitcoin, which have seen the largest average increase in wallet outflows since May. However, one coin has bucked the trend and is witnessing an increase in the number of new wallet address growth in the midst of the market chaos. This interesting phenomenon is happening with Cardano - the number of new wallet addresses for its native token ADA, has been growing sharply over the past week, with the current market turbulence seemingly fueling the adoption in ADA.
ADA Wallets and Daily Address Growth Surged After FTX Scandal
According to Cardano data tracker, Cardano Blockchain Insights, instead of declining as many would expect due to the market selloff, the number of addresses on the Cardano blockchain bucked the trend and started climbing even more aggressively after news of FTX’s implosion spread through the market.
Not only that, the daily number of new wallet addresses even spiked to an all-time-high after the market learnt that FTX had filed for bankruptcy.
*Screenshots extracted from Cardano Blockchain Insights
Implosion of FTX Becomes a Boon for Cardano
This begs the question, why did the demise of FTX cause adoption of ADA to pick up?
The reasons for this could be easily explained. One reason could be that ADA is one of a few, if not, the only blockchain, that does not set a minimum number of tokens needed to stake directly on the blockchain. Users can join the Cardano blockchain and stake any number of ADA tokens anytime they wish, with no minimum, as opposed to the larger chains like Ethereum, which have a minimum of 32 Ethers needed to be able to stake directly. Ether holders who have less than 32 Ethers are not able to stake directly, which has resulted in the birth of staking pool operators who take this opportunity to create a business out of this restriction. Staking pool operators pool together different users’ varying amounts of Ether to meet at least the minimum 32 Ethers required so that everyone can have a chance of earning Ethereum staking yield. However, since a staking pool operator is a business, this results in centralisation of the process. After a user joins a staking pool, the control of his/her Ether will lie in the hands of the pool operator instead of being with himself/herself. The staking pool operator is thus a centralized entity which in an indirect way, controls the rights to the users’ staked coins. With the implosion of FTX, faith in centralised entities have dropped to a new low, and crypto investors have been moving funds out from centralised entities into decentralised blockchains that they have full control over. This is where Cardano has an edge.
Furthermore, another advantage that Cardano has over other blockchains is that the staked ADA tokens are not locked. After the market had been scared out of wits from the big amount of locked Solana (SOL) tokens that would be due to be unlocked and potentially dumped in the market (the SOL unlock has since been postponed over and over again), investors are now more wary about locking up their crypto tokens. As such, the proposition of no locking of staked tokens of the Cardano blockchain now looks extra appealing. Stakers on Cardano are free to unlock their tokens and withdraw anytime they wish, the staked ADA tokens also never leave their owners’ wallet unlike in most other PoS blockchains where the coins need to be moved into some form of custody.
Another reason for the increase in new addresses could be that investors are simply taking the dip as a good buying opportunity to start picking up some ADA after its price has fallen.
Upcoming Cardano Conference Could Be Another Factor
Another factor that could be contributing to Cardano’s newly found popularity may be its Summit that is slated to occur between 19 to 21 November, which is this month. Every year, the Cardano Foundation will organise a global summit that gathers the Cardano community together for events, promotions and sharing of key milestones and updates. Key partnerships are also announced at this time by Cardano Founder Charles Hoskinson, who will by default, speak about positive things about the network. Other than Hoskinson, a lot of developers and projects building on Cardano will also be speaking at this summit, which could attract eyeballs and generate buzz on the ADA token.
In the past summits, the price of ADA often pumped ahead of the event and would retreat once the summit ends. Hence, while the new addresses could be new ADA buyers who recently learnt about ADA, they could also be experienced investors buying at a low price now with the hope of selling at a higher price when the hype of the summit starts to drive the price up. Last year, in the month leading up to the summit, the price of ADA rose by almost 100%.
With an imminent price catalyst like the summit, ADA appears to be an attractive investment for crypto investors who are finding that trading to earn profits is getting increasingly difficult in the current difficult environment, as trading volume and volatility has come to a standstill. In contrast, buying ADA to stake for a couple of weeks and earn some yield, with the option of unstaking anytime when its price goes up to sell for a profit seems like a workable idea. Having full control of your coins while still getting a yield without needing to lock them up, with the hindsight of the FTX bankruptcy scandal, now has a renewed appeal.
The above is the personal opinion of the author and is not to be taken as the official view of Margex. It is also not financial advice and should not be construed as a solicitation to trade. Readers are advised to do your own research, conduct proper due diligence, as well as assess your financial situation before doing any investment and trading as these activities carry risks. Should you be in doubt, please speak with your personal financial advisor.