- Cardano is a leading blockchain with a market cap of over $8 billion.
- It has a bigger valuation than some well-known companies like Carvana and SoFi.
- Cardano has a DeFi TVL of just $187 million, lower than many networks like Avalanche and Optimism.
Cardano price has had a spectacular fall from grace in the past few years. ADA peaked at $3 during the crypto bull run in 2021, giving it a market cap of over $90 billion. The coin has now dropped by over 92%, giving it a market cap of over $8 billion.
Is Cardano overvalued?
For starters, Cardano is a leading layer-1 network that aims to be a leading player in the decentralized industry. It rose to prominence in 2021 as investors looked for a viable alternative to Ethereum. At the time, Ethereum was a proof-of-work (PoW) network that had high carbon emissions.
Cardano is now widely used across all key industries in the blockchain industry. It is used in key sectors like non-fungible tokens (NFT) and decentralized finance (DeFi). Some developers have also integrated it in their metaverse projects.
A key concern among investors is whether Cardano is overvalued. Besides, $8 billion is a lot of money. At this valuation. Cardano has a bigger valuation than Carvana, Lyft, SoFi, and Affirm.
Valuing blockchain networks like Cardano is not easy. Unlike stocks, we cannot use approaches like discounted cash flow (DCF) and price-to-earnings (PE) multiple comparisons.
Read more: How to buy Cardano.
One way to go about this is to look at its ecosystem and compare it with its current valuation. DeFi is the biggest use case of the blockchain industry. A look at this ecosystem shows that Cardano has 27 DeFi dApps in its ecosystem. Ethereum, Tron, and BNB have hundreds of these dApps.
At the same time, Cardano has a TVL of $187 million. In ADA terms, Cardano’s DeFi TVL has surged to a record high of 765 million. Therefore, Cardano has a market cap to DeFi TVL of 42, which is high. Tron, in contrast, has a market cap of over $7 billion and a DeFi TVL of over $6 billion.
Cardano has a small market share in the NFT industry and its network revenue is quite minute. Data shows that its 24-hour fee tends to be less than $3,500. Therefore, taking this average, we can estimate that Cardano’s annual revenue is ~$1.3 million. As such, it is hard to justify a valuation of over $8 billion.
Cardano price prediction
The daily chart shows that the ADA price has been in a strong bearish trend in the past few months. It crashed to a low of $0.2367 last week. The coin remains below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is below 50. Cardano’s price has mirrored that of Bitcoin and other cryptocurrencies.
In the near term, I suspect that ADA price will remain in this range and then it will have a bearish breakout and retest the YTD low of $0.2295.
