The price of Cardano (ADA) rose more than 100% in the past week as it overtook Bitcoin Cash (BCH) to become the world’s sixth-largest cryptocurrency by market capitalization.
There are two major factors behind ADA’s strong upsurge throughout the past several weeks. First, most major cryptocurrencies saw large rallies following BTC’s uptrend to $36,400 and Cardano has some important network upgrades lined up in 2021.
Excitement builds over Cardano’s smart contract deployment
Cardano launched the Shelley mainnet in 2020, kickstarting the growth of Cardano as a proof-of-stake blockchain protocol.
The release of Shelley was a major milestone for Cardano, which led the overall sentiment around ADA to improve throughout 2020.
However, functional smart contracts are yet to be deployed on the Cardano blockchain. When smart contracts are live, large-scale decentralized finance (DeFi) protocols and other decentralized applications would be able to launch on top of Cardano.
Researchers at Binance Academy said that the release of functional smart contracts is a part of the Goguen update. Considering the significance of this network upgrade, the market sentiment around ADA appears to be improving. The report read:
“As of December 2020, functional smart contracts cannot be deployed on the blockchain platform. As part of the roadmap, this will roll out as a part of the Goguen update. Following Goguen, the Basho era focuses on optimization of scalability and interoperability, and the Voltaire era introduces a treasury system to address governance.”
Smart contracts on Cardano are different from other blockchains because they allow developers to code self-executing smart contracts based on programmed conditions. This allows developers and decentralized applications to be more flexible. Emurgo, a blockchain solutions firm, wrote:
“These contracts, when written on the Cardano blockchain, offer the value of giving full visibility to all participants of the contract, while also being extremely secure and self-executing according to the programmed conditions.”
The current move is largely technical
Although Cardano has major upgrades on the horizon, no large upgrades were announced during the period of the rally.
Technical analysts and traders anticipated a large ADA rally in late December 2020, as large-cap crypto assets rallied in tandem.
On Dec. 30, Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said he believes Cardano would do well in the first quarter of 2021. He wrote:
“One of the platforms that will do well in coming quarter, I think will be #Cardano. Majors are probably running first and this is definitely a major. As long as $0.11 holds (or $0.15), I think we’ll continue towards $0.27 and/or $0.40.”
A combination of technical factors and the expectations of the release of functional smart contracts in 2021 likely fueled the rally.
In the near term, analysts say that as long as BTC consolidates above $34,000 and shows technical momentum, large-cap altcoins, like Cardano, are expected to perform strongly.