What Is Cardano and How Can You Trade ADA?

While Cardano (ADAUSD) might not be as popular a cryptocurrency as Bitcoin (BTCUSD) and Ethereum (ETHUSD), it still considered one of the most traded cryptocurrencies in the world (as of May 2024).

Let’s learn more about Cardano and its token ADA in this article:

TL;DR

• Cardano was founded in 2015 and launched in 2017.
• As the first proof-of-stake blockchain crafted through peer-reviewed research and evidence-based methods, Cardano prioritises a scientific approach to blockchain development.
• ADA is the native cryptocurrency of the Cardano network.
• Both Ethereum and Cardano are proof-of-stake blockchains, while Bitcoin follows a proof-of-work network.
• ADA prices can be influenced by numerous factors such as crypto regulation, blockchain use cases and updates, interoperability, network performance, and trader confidence, among others.
• In addition to buying ADA tokens, Contracts For Difference (CFDs) on ADA are another popular choice for traders wanting to speculate on its price direction over the short term.
• Short-term trading such as day trading and swing trading are some of the most popular trading strategies for actively trading ADA.

What Is Cardano?

Cardano distinguishes itself as a third-generation layer one blockchain, presenting advancements beyond earlier blockchain technologies like those of Bitcoin or Ethereum. This is done through specific features, such as an academically rigorous foundation using evidence-based methods, as well as a new decentralised proof-of-stake network and smart contract functionality.

Various independent entities collaborate within a decentralised team structure in Cardano, such as the Cardano Foundation, Emurgo, Input Output, Intersect and Pragma.

The History of Cardano: Key Events and Milestones

• From 2015 to 2017: Prominent members of the Ethereum project like Charles Hoskinson and Jeremy Wood dedicated their efforts to the development of the Cardano blockchain.
• September 23, 2017: The Cardano blockchain took its inaugural step with the mining of its first block, adhering to a research-oriented, academic methodology in its development and architecture.
• 2020: The Shelley era marked a significant phase of growth and advancement for the Cardano network, particularly in the realm of decentralization. This was achieved by progressively transferring node operations to the Cardano community. As more individuals participated in running the network, Cardano's security and robustness were bolstered. Additionally, the Shelley era potentially laid the groundwork for the introduction of a delegation and incentive scheme, further empowering the community and promoting active participation.
• 2021: Following a period of emphasis on decentralisation, the following era of Cardano’s roadmap is the Goguen era, which focused on increasing the Craadano network’s capability. It implemented several upgrades providing new functionality such as enabling the network to incorporate smart contracts. This allowed users to develop decentralised applications and introduced support for new natively-supported tokens, including both fungible and non-fungible tokens, through a multi-currency ledger.
• As of 2024: Cardano's roadmap extends into two additional phases the Basho era and the Voltaire era. The Basho era of Cardano is working on the network’s optimisation, enhancing the scalability, performance, and interoperability of the blockchain to effectively accommodate the expansion and adoption of applications with high transaction volumes. Key developments during this phase might include the implementation of sidechains and parallel accounting methodologies. The Voltaire era should follow and prioritise governance, equipping Cardano with the necessary tools to evolve into a self-sustaining system.​​​​

Cardano vs Ethereum

Led by the co-creator of Ethereum, Charles Hoskinson, Cardano positions itself as a strong competitor in the smart contract arena, which means that it is often compared to Ethereum. However, Cardano’s open-source blockchain boasts faster transaction speeds, greater agility and flexibility, and a somewhat more secure network compared to Ethereum.

Both platforms facilitate Decentralised Applications (DApps) and smart contracts (two major cryptocurrency terms you need to be aware of), but Cardano leverages a unique proof-of-stake consensus mechanism called Ouroboros. Unlike Ethereum's current proof-of-work system, which can be energy-intensive, Ouroboros is designed to be more efficient and secure.

With proof-of-stake blockchains, users with more coins have a greater chance of being selected to validate transactions. They only need to state their tokens, which tends to create a system where validators have a vested interest in ensuring the network's security.

Cardano vs Bitcoin

The cryptocurrency space is often dominated by discussions around “what the difference between Ethereum and Bitcoin is” due to the popularity of these cryptocurrencies in the industry. However, Cardano presents a compelling alternative for some traders that shouldn't be overlooked.

Bitcoin launched in 2008 and established itself as a revolutionary peer-to-peer payment system. Cardano, on the other hand, takes a broader approach. It aims to build a comprehensive blockchain ecosystem that facilitates not only payments but also the creation of custom tokens and decentralised applications.

Another key distinction lies in how transactions are verified. Bitcoin's validation relies on the energy-intensive Proof-of-Work (PoW) system where miners compete with increasingly powerful hardware to solve complex puzzles. In contrast, Cardano utilises a more eco-friendly Proof-of-Stake system. Here, validators simply stake their own ADA coins to secure the network.

Designed for growth, Cardano's Ouroboros protocol overcomes the scalability limitations of Bitcoin's PoW system. This enables Cardano to potentially handle a larger user base and increased transaction volume without compromising efficiency.

What Can Drive the Price of Cardano (ADA)?

While some factors influencing Bitcoin prices can also affect Cardano, there are additional drivers unique to Cardano due to the specifics of its blockchain and network:

ADA’s Availability on Crypto Exchanges

ADA's availability on exchanges, especially major ones, can significantly influence its price by affecting accessibility, liquidity, market reach, trader sentiment, and overall demand for the token. Listings on reputable exchanges can generally boost ADA prices, while delistings can lead to liquidity issues and negative market sentiment, potentially resulting in price declines.

The Circulating Supply of ADA

The changes in the circulating supply of ADA tokens compared to the maximum supply can, whether due to tokenomics, staking mechanisms, or external factors, can play a role in determining its price by affecting supply and demand dynamics, and market perception and sentiment.

As of May 2024, around 79% of the total ADA tokens are available, as more than 36 billion ADA tokens out of the capped total supply of 45 billion have been created.

Project Catalyst

Project Catalyst is Cardano’s innovative grant program that acts as a growth engine for the Cardano ecosystem. By funding promising projects and initiatives, it fuels development and attracts users. More users often mean increased demand for ADA, the Cardano token, potentially boosting its price.

Project Catalyst goes beyond funding. It empowers the Cardano community to have a say in the future by letting them vote on proposals. This fosters a sense of ownership and keeps the community actively engaged, which can further strengthen ADA's value.

Cardano Blockchain Use Cases

Cardano supports programmable smart contracts, allowing for the creation of decentralised financial applications such as lending platforms, Decentralised Exchanges (DEXs), yield farming protocols, and Automated Market Makers (AMMs).

The Cardano blockchain can also enable the creation and issuance of custom tokens, the implementation of a transparent ledger to verify the authenticity and origin of products, and the creation and management of secure digital identities and credentials, among others.

These are just a few examples of the potential use cases for the Cardano blockchain. As the ecosystem continues to evolve, additional use cases and applications are likely to emerge, driven by innovation and collaboration within the Cardano community, and potentially driving ADA prices up.

Blockchain Upgrades

Developments within the Cardano blockchain and its ecosystem, particularly through blockchain upgrades, can have a significant influence on the price of the ADA token. Because they can introduce new features, improve scalability, enable interoperability with other blockchains, refine Cardano’s governance mechanisms or enhance security, these upgrades can increase the utility and attractiveness of ADA, which, in turn, can support its prices.

Crypto Regulations

Regulations can influence the price of ADA tokens mostly by providing a potentially more solid or more restrictive legal framework, preventing fraud and manipulation, and offering clearer compliance requirements. Crypto regulations can also affect market access of some cryptocurrencies, mostly through geographical restrictions.

Competition

Competition from other blockchains can influence the price of Cardano (ADA) in several ways, such as technological advancements regarding innovation, scalability and performance, market share and adoption, partnerships and collaboration, reputation and branding, as well as DApps, smart contracts, and interoperability.

Speculation

Trader expectations and market sentiment can drive speculative buying or selling waves. Additionally, the fear of missing out (FOMO) can lead to rapid increases in buying activity as traders speculate on potential price increases, which can create a self-reinforcing cycle, pushing prices higher.

Cryptocurrencies are known for their high volatility, with prices capable of significant fluctuations within short periods. This volatility can attract traders looking to capitalise on these price swings, but it also means that they are riskier than less volatile traditional financial assets. High volatility can also lead to variations in market liquidity.

3 Ways to Trade Cardano (ADA)

One of the first ways to trade Cardano (ADA) is to buy the cryptocurrency in order to resell it later when the price has risen. You can either buy a crypto-fiat pair like ADA/USD or ADA/EUR, but you can also trade crypto-to-crypto pairs like ADA/BTC or ADA/ETH.

Some exchange platforms, such as Kraken or Binance, offer futures contracts on the ADA cryptocurrency. These financial products allow traders to take advantage of a mechanism where a buyer and a seller agree on the future value of the cryptocurrency to exchange it at a certain price at a later date.

For retail traders who want to actively trade Cardano without going through the sometimes lengthy and complex process of opening an account on an exchange platform, buying the cryptocurrency and securing it, there is another solution: Contracts For Difference (CFDs) on Cardano.

This derivative uses leverage to speculate on price rises and falls without having to hold the underlying cryptocurrency. Although leverage allows you to start with a relatively small initial amount of trading capital while controlling larger position size, meaning that your potential profits or losses will also be magnified.

Why Do Some Traders Use Cryptocurrency CFDs to Trade Cardano (ADA)?

Here are potential reasons why some traders trade cryptocurrency CFDs to get exposure to the Cardano market:

Rising and Falling Markets

CFDs allow traders to buy cryptocurrency pairs with Cardano if they believe they’ll rise, and short-sell if they believe that prices will fall. By allowing shorting, CFDs on cryptocurrencies give a chance to traders to capitalise on bearish and bullish markets.

No Need to Secure Your ADA

Because CFDs on ADA only tracks the price of the Cardano, allowing traders to speculate on the potential future rise or fall of ADA prices, you do not own any ADA when trading cryptocurrency CFDs. This means that you don’t need to store and secure your tokens.

Cutting Edge Online Trading Platform

CFD providers like Plus500 usually provide a powerful, robust, and advanced online trading platform, so then all types of traders can use its platform with an Internet connection to trade cryptocurrencies CFDs like ADA.

Several Financial Markets in One Platform

More than just cryptocurrencies, CFD providers usually offer its clients several other instruments, so then they can capitalise on other trading opportunities. It is therefore possible to get access to various asset classes in a single trading platform to diversify its positions. Traders can also often trade CFDs on indices, Forex, shares, commodities and Exchange-Traded Funds (ETF).

Small Initial Deposit

Because CFDs are margin traded, allowing traders to manage a larger trading position than what they could normally get with their capital, CFD providers frequently require a small amount of initial capital to get ready to trade with CFD trading.

What Are the Risks of Using CFDs to Trade Cardano (ADA)?

Before getting started with ADA CFD trading, it’s important to not only consider the advantages of using CFDs but also the associated risks:

Leverage

Leverage is a double-edged sword in CFD trading because while leverage can allow you to potentially increase your profits,when you trade in unfavourable markets, it also amplifies your potential losses.

Market Volatility

As ADA and other cryptocurrencies are known to be volatile assets, extreme and rapid price movements can result in rapid losses, which can be exacerbated by leverage.

Complexity

CFDs and cryptocurrencies are considered complex high risk financial instruments and assets, whose price dynamics aren't always easy to understand, which could lead to poor trading decisions and potential losses.

Psychological Stress

The high-risk nature of CFD trading, combined with the extreme volatility of the crypto market, can lead to significant stress and emotional decision-making, especially with the challenges of short-term trading.

Cardano offers a unique blockchain platform with the ADA, its native token, fueling the network and allowing users to participate in its governance. Like most cryptocurrencies, the price of ADA can be influenced by various internal and external forces. This price movement presents an opportunity for crypto-traders to speculate on Cardano's future with CFDs. While CFDs can be risky financial products due to leverage, if you understand the risks and have a sound trading strategy, you may consider CFDs on Cardano.

Now that you know what Cardano is, what can influence the price of ADA, and how to trade Cardano (ADA), you can start trading Cardano CFDs on Plus500.

Cardano Price & Trading - Frequently Asked Questions (FAQs):

Cardano price prediction: What factors influence Cardano prices?

When thinking about the future of Cardano, you might want to take into consideration the drivers of Cardano prices. The popularity of the ADA, its tokenomics, the rate of adoption of its token and decentralised projects, its use cases, as well as the market sentiment, the regulation surrounding cryptos and speculation are some of the most influential factors on the ADA prices.

How can I trade Cardano online?

Some retail traders like to use Contracts For Difference (CFDs) to trade ADA, as they allow them to speculate on the price of Cardano without having to own the underlying tokens. With CFDs, it is also possible to trade bullish and bearish markets. Finally, CFDs can be used with leverage, which can magnify both your potential profits and losses.

What are Cardano trading hours?

Cryptocurrency markets operate 24/7, but trading hours for Cardano CFDs depend largely on your CFD provider. To know when you can trade Cardano CFDs, check the trading hours on Plus500.

What are the most popular trading strategies used with Cardano (ADA)?

Even though the cryptocurrency market is relatively young compared to other traditional financial markets, it is not uncommon for crypto-traders to use a mix of technical analysis and fundamental analysis on ADA to decide whether they should buy or short the Cardano, with strategies like day trading and swing trading.

How can I get started with Cardano CFD trading with Plus500?

To learn how to trade cryptocurrencies with Plus500 and test your trading plan, you could open a demo account first, which will allow you to practise trading with near real trading conditions but with virtual funds. Once you’re ready, you can consider switching to a real trading account. Then, you can find the ADA/USD pair on the trading platform and buy or sell it depending on your strategy. Remember that Plus500 offers a wide range of risk management tools to protect your trading capital, such as trading alerts and various kinds of stop-losses, like trailing stop and guaranteed stop.