Cardano in Crisis. Is It Time to Sell?

Cardano (CRYPTO: ADA) has fallen by 24% in the past week, taking it to a five-year low of $0.16. Sure, cryptocurrency prices have taken a dive across the board, but Cardano has dropped more than 75% in a year, and what's happening goes beyond its price: Cardano's model is failing. In an emotional video, Cardano's founder Charles Hoskinson described the ecosystem as a "toxic hellscape" and called on the community to make major changes to stop Cardano from dying.

When you hear such dire warnings from the face behind a project, it is time to think about selling your crypto. I've held Cardano for years because I believed there's long-term potential in a research-driven crypto that aims to use the blockchain to make a difference in the world. I admire Hoskinson, and I still think Cardano has strong technology and the know-how to solve big problems in the sector. But it is shooting itself in the foot with ongoing infighting and an inability to make key decisions.

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The closure of TapTools is the tip of the iceberg

Cardano's issues came to a head this week with the news that TapTools, a key analytics and price-tracking platform, will cease operations. After the departure of key personnel, the team said the economics of keeping it running no longer worked. It isn't just TapTools; this follows last month's closure of JPG Store, and Hoskinson warned that more projects will fail.

It matters for two reasons. First, project closures reflect a shrinking ecosystem, which is the opposite of what Cardano needs. Having lots of applications, users, and developers is how cryptocurrencies build value and continue to innovate. Cardano is already trailing its competitors in key metrics, like the amount of funds on its network and stablecoin issuance.

Second, Cardano's governance is broken. Its Voltaire upgrade pioneered decentralized, community-led governance, in which delegates vote on a range of issues, including treasury decisions. Crucial initiatives like a wealth fund failed to get enough votes. Such a fund, composed of stablecoins and other cryptocurrencies, would have supported projects like TapTools during crypto price slumps.

Putting aside the individual decisions, the reason I'm readying myself to sell is that Cardano's leadership and vision have gotten lost in the minutiae, and it can't see the forest for the trees. Think about the organizations you are part of. If each stakeholder had to vote on everything, including budget allocations, nothing would ever get done. Someone needs to steer the ship and set priorities, and neither Hoskinson nor the other big Cardano entities has the power to do that.

Cardano needs to make changes

Whether I'm investing in stocks or crypto, I aim to hold for five years or more, but having a long-term focus shouldn't blind investors to a project's fundamental problems. Cardano's governance is not working, and that has stopped it from expanding and capitalizing on broader industrywide growth in things like stablecoins, which could embed crypto in mainstream finance.

TapTools' closure should be a wake-up call for all Cardano investors. The community needs to agree on a strategy and start approving the necessary spending to support this ailing ecosystem and stop Cardano from failing. I will watch to see whether Hoskinson's warning galvanizes action, and if not, I will sell my Cardano. You may not want to wait that long.

Emma Newbery has positions in Cardano. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.