Cardano War Chest Growing: Why Is ADA Dropping?

On-chain data on April 5 shows that the Cardano Treasury is rapidly growing even as ADA prices struggle to shake off determined sellers. Currently, the treasury holds over 1.48 billion ADA worth over $843 million at spot rates.

If adoption projections are anything to go by, the figure could exponentially increase in the coming months, possibly propping up ADA prices.  

Cardano Treasury Rising: Bullish For Development

The Cardano Treasury exists by design. It serves as a war chest to fund ongoing development. 

A fixed amount of ADA is set aside per epoch—that is when a block of transactions is confirmed—and sent to the treasury. Every epoch is completed roughly after five days.

Besides ADA accumulation from reserves, the treasury reserves a portion of funds from transaction fees. The more Cardano finds adoption and hosts decentralized applications (dapps) like decentralized exchanges (DEXes), the more the treasury goes.

With ADA from every epoch and transaction fees, Cardano gets sufficient funds to continue development. This arrangement is critical considering that Input-Output Global (IOG) is actively pushing new updates to make the network more performant and reliable.

Currently, in the Basho stage, the objective is to improve performance, allowing the network to host intensive dapps and compete with Ethereum and Solana. Already, Cardano is finding favor, especially from governments.

Apart from liaising with the government of Ethiopia to enhance education by leveraging the blockchain, agencies in the United States and Europe are also looking at Cardano.

Will Rumored Partnership Drive ADA Higher?

Rumors suggest that various states in the United States have approached Cardano developers about developing a transparent blockchain voting platform. Though discussions are said to be underway, key details remain out of public reach. 

Even so, there are blockchains of choice other than Cardano. Options like Solana or Ethereum can be solid alternatives. One of the world’s largest asset managers, BlackRock, issued a tokenized fund on Ethereum, seeding it with $100 million. 

Whether the community will accept partnership deals as bullish remains to be seen. Presently, ADA is under pressure, dropping 30% from March highs. Despite attempts for higher highs on April 4, sellers flew back today, wiping out gains.

Any breakout below $0.55 might accelerate the dump towards $0.45, wiping out Q1 2024 gains.

Even with the bearish outlook, some analysts are bullish. After a period of sluggishness, the 2-week chart is flashing green, mirroring the green wave seen at the beginning of the 2020 bull run. 

Feature image from Canva, chart from TradingView