Cardano (ADA-USD): The ‘Update Cycle’ Tells Us What’s Next

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Thesis Summary

Cardano (ADA-USD) is one of the most established competitors to Ethereum (ETH-USD), making it one of the most promising altcoins. I believe, in this next bull cycle, we will see ADA reach much higher levels and deliver very substantial returns.

There are two clear indicators that ADA is heading up in the medium term. First off, as I’ve mentioned in previous articles, we are clearly entering altseason, which means that altcoins are getting ready to move to the upside.

But, more importantly, if we follow the behavior of ADA leading up to the various updates the network has undergone, we can see a clear pattern emerging. The next update, Basho, has no official release date yet, but it should come out at some point in 2022.

The Cardano Update Cycle

ADA Roadmap

ADA Roadmap (Cardano Website, roadmap.cardano.org)

One of the things I really like about Cardano is that it has always had a very clear Roadmap. There are 5 clearly distinct eras, each representing a different stage of the Cardano network’s growth journey; Foundation, Decentralization, Smart Contracts, Scaling, and finally Governance

Byron was the foundation of Cardano, with the first block being mined Then followed by Shelley, which expanded the network and introduced delegation.

As I write this, Cardano is in the Goguen era, with smart contract functionality having been recently integrated into the network through the Alonzo update. Smart contracts in ADA are written in a language called Plutus and Marlowe. Through these two languages, Cardano is trying to make smart contract coding accessible to everyone.

So far, I’d say that smart contract deployment has been incredibly successful in Cardano. There are currently over 2500 Plutus scripts deployed on Cardano:

Plutus Scripts

Plutus Scripts (ADA Network stats, datastudio.google)

The next era will be Basho, named after the Japanese poet. This era will bring about greater scalability thanks to the introduction of sidechains, which will take the pressure off the main blockchain.

But why are these updates so significant? Well, besides the fact that they literally change the Cardano network, they also seem to have a strong, and perhaps predictable effect on price.

ADA Eras

ADA Price and Eras (Author’s work)

If we look at the last three updates, ADA’s price has always rallied strongly leading up to the update. In the months leading up to Shelley, ADA went from $ 0.02 to $ 0.15. Between Shelley and Goguen, ADA also appreciated significantly, and we see nothing but green in the months leading up to the upgrade. Notice also how following the update the price begins to fall. You might call this a “sell the news” reaction.

Looking forward, we have the Basho update theoretically launching in 2022. I’m thinking late 2022 or even 2023 given how these things usually get delayed. We have seen significant depreciation following Goguen, and now we have perhaps 8 months until Basho. My expectation, therefore, is that we should see ADA come down significantly in this time frame, and at the very least in the 3-4 months leading up to the next update.

How to Play This

Ultimately, there is a lot to like about Cardano and its token, ADA. The technology is great, fees are low and there is a clear path toward making the blockchain more scalable and decentralized, (Voltaire).

However, I should tell you that I do not think the low is in on ADA. Currently, I believe both Bitcoin and altcoins are setting up for lower lows, so it is important to play this smart. The simple thing to do is to dollar costs average into ADA over the coming months.

I have numerous limit buy orders ready to trigger at lower prices. The targets for these orders have been set using various forms of technical analysis, to catch ADA key inflexion points. Members of Technically Crypto, get access to these buy / sell orders.

The most important thing now though, is not to panic sell. Large institutions and smart investors are using this time to accumulate, and patience is key.

Final Thoughts

Altcoins like Cardano, have incredible potential, and they could take off as fast as the bottom, so we have to be ready. I cover various altcoins in my service, at both the fundamental and technical level, and have built a portfolio of the ones I believe have the best technology and hold the highest return potential.

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