Grayscale Claims Cardano Is Undervalued Compared to Its Competitors – Cardano Weekly

Cardano has continued swinging between third and fourth place among coins with the largest market capital. Last weekend the coin overtook Tether to claim third place shortly before Binance Chain surpassed it. The token is again back at third place, but the scenario might play out just like last week's, especially with token trading sideways.

Grayscale report concludes Cardano (ADA) is underpriced

Digital asset management firm Grayscale recently released a report detailing that Cardano is trading lower than it should be based on its strengthening fundamentals. The report explained that relative to the top two crypto-assets, Bitcoin and Ethereum, Cardano is undervalued.

In their argument, the report's authors set forth that the market had failed to keep up with the growth the Cardano ecosystem had seen. The launch of smart contracts thanks to the Alonzo upgrade at the end of last month has been the most significant development for Cardano in recent days. The development, however, didn't very much reflect in the price of the ADA token as it barely gained the boost most coins see after a huge milestone.

The digital currency investing services firm further pointed out that the network had settled higher payment value/unit of the market cap than its direct rivals, having completed more than $1.6 trillion in on-chain transactions over the past year. For context, Bitcoin and Ethereum recorded a total of $3.1 trillion and $2.8 trillion in on-chain transaction value, respectively. This is ‘expected' considering Ethereum has more than twice (7 million) the number of active users Cardano has (2.8 million).

The report estimated the ‘correct' market value of Cardano at $30,000 and that of Ethereum at $55,000.

“Ethereum's value per user is ~$55,000 while Cardano's is ~$30,000. This may imply that Cardano is lower valued relative to its largest comparable crypto network, Ethereum, based on this particular metric.”

Cardano currently sits marginally above Binance's token with a market capital of $71 billion, about 80% lower than Ethereum.

Market capital of the top five cryptocurrencies. Source: coinmarketcap.

The latter sits in second place with a figure of $424 billion and at the very top is Bitcoin, with a staggering $1.06 trillion in market capital.

Grayscale identified the number of transactions settled per day as another metric in which Cardano had seen growth. The network currently settles over 115,000 transactions which is 13 times more than it did at the beginning of the year.

The rewards paid to ADA stakers for securing the network have also been swelling. As a competitor in the decentralized finance space, Grayscale observed that the Cardano ecosystem had a lot to accomplish before becoming dominant.

Explaining the current position of Cardano, the report stated that Cardano's tenacity and determination in getting things right on the first attempt had impeded its growth.

“The trade-off of Cardano's approach has also resulted in its biggest weaknesses, which include: a historical lack of smart contract capabilities, an unproven track record for how well dApps will function, a still maturing third-party developer ecosystem, lack of widespread mainnet dApps, and lower transaction fee revenue.”

Cardano market performance

The price of the ADA token has slowed down in October after a fairly decent start at the beginning of the month. Cardano peaked at $2.37 on Thursday but fell below $2.3 hours later and remained at this range towards the end of the week. The token is now trading at $2.24 – 1.39% down for the day and 28% lower than its all-time high of $3.10 set last month as per coinmarketcap.

Cardano price action over the last 7 days. Source: coinmarketcap.

An uptrend appears favorable, but bulls will have to keep the price of ADA above $2.10 for any bullish momentum to hold. The token faces considerable resistance on its path to $2.40, but the door could open up to retest September highs if it breaks above $2.45. On the other hand, if the token fails to maintain or gets rejected above its current position, it will likely drop below $2.10.