The cryptocurrency market is watching the performance of Cardano (ADA) closely as the altcoin is seen as a strong contender in the next bull market cycle. Although it is currently below its ATH seen in 2021, Cardano’s strong core and active development community indicates the potential for new highs.
One of the main features of Cardano (ADA) is its total supply of 45 billion coins. This is significantly higher than that of Bitcoin (BTC), which has a maximum supply of 21 million, and has raised concerns among investors about the coin’s price appreciation potential. The ability to burn tokens has been discussed as a way to solve this problem, but whether this will have a significant impact on the value of the coin remains to be seen.
Token burning is a widely used tactic in some cryptocurrency projects, where a portion of the tokens in circulation are destroyed in order to potentially increase the value of the remaining tokens, if demand for the coin remains constant or increases. However, Charles Hoskinson, the founder of Cardano, strongly criticized this approach.
He argues that the practice has no real fundamental value for the project and can be used as a tactic to manipulate the price of a token. Additionally, Hoskinson argues that token burning can lead to decreased liquidity and greater market volatility, which can negatively impact investors.
As a result, the entrepreneur favors a strategy where the Cardano project emphasizes advancing its technology and building a strong user base, rather than relying on price manipulation tactics to short term.
Could burn rates benefit the ADA price?
Token withdrawals from circulation, as seen in BNB token burns, may have a limited effect on the price of Cardano (ADA). Historically, such actions have been associated with temporary price increases, but over time the impact of token burning has become less pronounced. It is essential to keep in mind that other factors, such as market demand, competition with other blockchain projects, and ongoing development efforts, also play a crucial role in determining the price of blockchain. a cryptocurrency.
The performance of other altcoins such as Shiba Inu (SHIB) and Terra Classic (LUC) further underscores this point. These tokens have seen significant price swings in response to major announcements and developments within their respective ecosystems, as well as during times of heightened optimism and speculation in the broader cryptocurrency market. In other words, tangible advances and investor sentiment outweigh symbolic destruction in the price formation of these cryptocurrencies.
Additionally, it should be noted that Cardano (ADA) is currently down 89% against its ATH. Although the token burn could potentially have a positive impact on the price of the altcoin, especially given its current performance in the market, it is unlikely to be enough to bring Cardano back to its previous maximum value of $3.10.
On the other hand, it is important to note that Hoskinson pointed out that Cardano’s governance model is designed to allow ADA investors to make changes to the protocol, such as adjusting the inflation rate. In the event of a significant decline in the issuance rate and insufficient trading volume to generate fees, it is possible for the community to vote on monetary policy changes.
However, these are only assumptions, and any change in monetary policy should be carefully discussed and evaluated by the Cardano community before any decision is made.