Is Cardano Too Cheap to Ignore at Today's Price?

At June 18's price near $0.17, Cardano (CRYPTO: ADA) is 94% below its 2021 peak and down 48% year to date. Now, rather than being on the cusp of a turnaround, there's reason to believe this coin's prospects are dimming further.

In late May, its community voted against funding the network's flagship summit in Singapore. Then, the founder warned of a coming "wave of ecosystem failures" and went silent for a few days in early June.

Nonetheless, it's impossible to ignore the fact that there's still an active holder community that's both involved and empowered in the chain's governance process, despite its falling price.

So is Cardano too cheap to ignore right now, or is it priced appropriately?

Image source: Getty Images.

What the failed vote shows

First, let's dig into the governance vote that scrapped the funds for the summit.

The nonprofit Cardano Foundation, which is responsible for the network's technical and ecosystem development, asked the treasury for 7.8 million ADA with which to host the 2026 Summit in Singapore. Though the founder backed it, the proposal received only 65.2% of the vote, short of the 66.6% supermajority threshold, so it failed.

Even with its founder's advocacy, the chain couldn't coordinate funding for its own showcase. It also leaves Cardano worse positioned relative to its major competitors, such as Ethereum and Solana, both of which host and attend numerous in-person events to foster the health of their ecosystems. More importantly, the failure may have shown that the chain's governance standards -- one of the pillars of its professed self-identity -- are too high to be workable in practice.

On one hand, that speaks to the idea that holding Cardano gives an investor a real say in the direction of the blockchain, which could add value to the coin in the same way that most stocks confer the ability to vote on shareholder issues. On the other, if Cardano's governance process can't create enough consensus for what should be totally noncontroversial spending for promoting and growing the network, it's hard to imagine how thornier (and ultimately far more important) topics, like how to revive its ebbing decentralized finance (DeFi) segment, could ever be addressed.

The value capture problem

Governance issues aside, Cardano also has tokenomics and value-capture issues that make it very hard to invest in.

Cardano doesn't burn transaction fees or run any token buybacks. That means there isn't any mechanism for holders to receive an additional return when there's a lot of network activity. Furthermore, its staking yield comes mostly from its own newly issued reserves, meaning that holders are inherently treading water against the inflation of its supply.

Therefore, Cardano only appears undervalued until you peel back the curtain on what holders actually receive for the price of a token. Aside from the ability to cast a vote, holders simply don't get much.

This coin isn't undervalued.

Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.