Cardano's Founder Predicts Hard Times Ahead. Here's Why That's a Reason to Sell It.

Cardano's (CRYPTO: ADA) community governance system is now fully operational, and so far, the community has voted to defund its own annual summit and starve a cybersecurity project of resources. Two of the chain's most prominent projects shut down within six weeks of each other.

Founder Charles Hoskinson responded to the chaos by announcing he was "taking a break." At this point, the only thing Cardano holders seem to agree on is selling; the coin is down 74% in the past year.

Hoskinson's prediction does not, in itself, constitute a reason to sell Cardano; people predict all sorts of things about the market all the time, and often for self-motivated reasons. But the factors that drove his prediction, when paired with other issues Cardano has, do constitute a reason to sell this coin, so let's take a look at what's going wrong.

Image source: Getty Images.

The ecosystem is collapsing

The crux of the problem with Cardano is that its ecosystem is small and rapidly weakening.

Its total value locked (TVL) in decentralized finance (DeFi) protocols has cratered from $653 million in December 2024 to $95 million today. Its number of daily active wallet addresses was just under 16,000 in May, down from approximately 485,000 active wallets per day at its November 2021 peak. Similarly, the number of daily transactions on the chain is just a fraction of its prior high, as are transaction fees. In other words, liquidity and users are exiting the chain together, which is a very bad sign.

Moreover, two of Cardano's flagship consumer-targeted projects have collapsed in just six weeks. JPG Store, the dominant non-fungible token (NFT) marketplace on the network, shut down on May 23. TapTools, an analytics platform with a million-plus users, said on June 2 it would wind down within two weeks.

Hoskinson called these events leading indicators for the chain's health, and he isn't wrong.

Voting has consequences

Hoskinson abdicated direct control over Cardano's governance as part of its Voltaire upgrade, which implemented a community voting system for governance.

That has had some consequences. On May 29, Cardano's on-chain governance mechanism held a vote, which ultimately led to the canceling of the $2 million in funds necessary to conduct its 2026 in-person summit in Singapore. A separate proposal to fund a quantum-resistant cybersecurity project for the chain is on track for rejection in a vote concluding this week. The coin's holders increasingly look like they won't fund Cardano's roadmap.

The deeper problem is that Cardano's investment thesis was never anchored to any single category where it dominated. Ethereum and Solana both have far more DeFi capital, faster transaction speeds, and higher throughput, not to mention lower fees in Solana's case. Cardano simply hasn't ever had an area where it excels, and now, investors are voting with their feet.

It makes sense to sell this coin and avoid buying it until that changes, and it might not ever.

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.