Cardano is undervalued, says Grayscale

Digital asset management firm Grayscale attributes Cardano’s slow progress to the firm’s constant desire to get it right

Grayscale Investments published a report on Sunday that suggested that Cardano may well be undervalued as compared to fellow crypto coins Bitcoin and Ethereum. The report argues that considering the growth that Cardano has seen with respect to its fundamentals, its value may be higher than where the market has it currently placed at.

The report named “An Introduction to Cardano” noted that the actual value of Cardano is about $30,000 and that Ethereum’s is around $55,000. Based on its argument, Cardano is currently about 45% cheaper than Ethereum, and Grayscale said that it is becoming home to decentralised finance (DeFi) projects due to its new smart contract functionality.

However, the report said that Cardano’s insistence on getting it right the first time around has curtailed its progress, as the project places a high value on academic research and peer reviewing.

“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,” the report read.

Despite this, Cardano has become the third-largest cryptocurrency by market cap, with the network having processed $1.6 trillion in on-chain transaction value over the year preceding the launch of Cardano’s core POS protocol mainnet version. Furthermore, the progressive adoption of smart contracts on the platform is part of the reason why Cardano has seen massive growth in 2021.

“Although large-scale dApp roll-outs may take some time, smart contracts are now being tested on the Cardano mainnet, and an early ecosystem of projects are emerging across several application use cases.”

Cardano, often dubbed the Ethereum-killer, has seen significant growth and adoption over the last year. The coin started 2021 at $0.18, rising to peak at $3.10 before falling to about $2.20 with the crypto market crash. Cardano also saw a sevenfold rise in the number of active monthly users this year to about 2.8 million.

Grayscale research analysts argue that Cardano may well be on course to become the most dominant altcoin by market cap, though they also see ADA showing much higher levels of volatility in comparison to Bitcoin and other altcoins.

Grayscale has acted on its belief in ADA’s potential growth but not as much as in ETH and BTC. The asset manager’s portfolio has Cardano as its third-largest constituent of the Digital Large Cap Fund, even though it only constitutes 5.1% of the $495 million fund. In comparison, Bitcoin and Ethereum boast 62% and 26%, respectively.