Looking to invest in Cardano? Here’s how much you should allocate based on its TVL

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Car­dano is known for its sci­en­tif­ic approach to build­ing a fair, sus­tain­able, and decen­tral­ized net­work. A Krak­en report called Car­dano, a Nakamo­to-style cryp­tocur­ren­cy with a Bit­coin-like sup­ply mod­el that deflates over time. In fact, the Car­dano foun­da­tion has been cit­ing its bull­ish pre­dic­tions for its native token. How­ev­er, it is to be not­ed, the price tra­jec­to­ry of the coin has will­ing­ly oblig­ed the BTC for over four months now.

Undoubt­ed­ly, it’s been a wild guess for investors, if they should cut loss­es at $1.07. At the back of decreas­ing vol­ume, the coin looks primed for a bear run to reach $1.013 sup­port. Notably, a sense of wor­ry seems to be pre­dom­i­nat­ing the mar­ket. While it might be dif­fi­cult to decide what per­cent­age of port­fo­lio one should allo­cate to ADA, there are cer­tain met­rics that might help one make a bet­ter decision.

The TVL tale

Car­dano was one of the most devel­oped chains in 2021 with many con­trib­u­tors to it. It means the num­ber of devel­op­ers who worked togeth­er to devel­op Car­dano was the high­est in the whole cryp­to space. The high devel­op­ment activ­i­ty is essen­tial­ly a pos­i­tive sign for Car­dano hold­ers. But the real ques­tion remains- Does it have an impact on ADA’s near-term price per­for­mance? Well, total val­ue locked has the answer.

Total Val­ue Locked on the Car­dano net­work sky­rock­et­ed to $96.12 mil­lion, at the time of writ­ing. For the first time in four­teen months, ana­lysts argue Car­dano is under­val­ued, shar­ing a bull­ish out­look on alt­coin. How­ev­er, it is to be not­ed that the increase in TVL is pri­mar­i­ly dri­ven by SundaeSwap.

When Sun­daeSwap got released in Jan­u­ary 2022, the net­work start­ed to see an expo­nen­tial rise in Total Val­ue Locked on Car­dano. The token stak­ing plat­form, at the time of writ­ing, held 96.94% dom­i­nance. How­ev­er, with the arrival of more decen­tral­ized appli­ca­tions, the dom­i­nance might go down sig­nif­i­cant­ly in the future. Cur­rent­ly, there are only five decen­tral­ized appli­ca­tions that are con­tribut­ing to the TVL of Car­dano. This gives a visu­al rep­re­sen­ta­tion as to how ear­ly we are in Cardano’s ecosystem.

Source: Defilla­ma

Gert van Lagen, a cryp­to ana­lyst, and trad­er believes that Cardano’s price has test­ed its 2018 top mul­ti­ple times; the next tar­get is $5 before the end of May 2022. How­ev­er, the token, for now, seems to be going down with the bears. After a major sell-off on 24 Jan­u­ary, ADA bulls exert­ed pres­sure but to no avail.

The coin formed a plateau for the week end­ing on 4 Feb­ru­ary. Fur­ther, the price climbed up the lad­der only to face resis­tance at the $1.21 lev­el. For the lack of demand, the coin sided with the bears and has been on a down­trend since. In order to reach the $1.62 lev­el, the bulls will have to break past their two months’ long resis­tance at $1.460. Inter­est­ing­ly, at the time of writ­ing, RSI stood in the over­sold ter­ri­to­ry at the 31-mark. A trend rever­sal can be on the cards soon. How­ev­er, the vol­ume oscil­la­tor showed no signs of revival which remains an area of concern.

Source: Trad­ingView, ADA/USD

Bull or Bear?

Car­dano in the last 24 hours had $17.56 bil­lion worth of vol­ume trans­ac­tions. Thus, beat­ing out Ethereum which had just $10.50 bil­lion worth of trans­ac­tions. It is a very sig­nif­i­cant dif­fer­ence because on com­par­ing both the ecosys­tems, Car­dano is still a baby. This sounds like a bull­ish bugle for ADA in the long term. In fact, in 24-hours, Car­dano had only $51,985 fees paid for its trans­ac­tion vol­ume. How­ev­er, for $10.50 bil­lion worth of trans­ac­tions (24‑H), 22.21 mil­lion worth of gas fees investors had to pay just to use the Ethereum ecosys­tem. The data proves, there is a lot of demand for the Car­dano ecosystem.

Source: Mes­sari

Even though some met­rics appear bull­ish, ADA may still go down the hill for the lack of much demand. There­fore, investors should thor­ough­ly research before decid­ing to bet on it.

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