The Cardano ecosystem is gearing up for a potential strategic shift in its treasury allocation, aimed at boosting its DeFi and stablecoin sectors. Founder Charles Hoskinson recently proposed the allocation of approximately $100 million worth of ADA from the network’s treasury towards a combination of stablecoins and Bitcoin.
In a statement on June 13, Hoskinson outlined the plan, mentioning that the funds would be used to invest in stablecoins like USDM, USDA, and ADA-backed stable synthetics such as iUSD, as well as Bitcoin to fuel the development of Bitcoin DeFi. This move is seen as a way to address a key weakness within the Cardano ecosystem, which is the limited adoption of stablecoins that has hindered its competitiveness in the DeFi space.
Hoskinson emphasized the importance of this shift, stating that it would help generate non-inflationary revenue for the treasury while building up the DeFi economy within Cardano. However, he also highlighted the need to assess the readiness of Cardano-based DeFi protocols and ensure sustainable ecosystem yields before implementing such a move.
The concerns raised by Hoskinson are well-founded as Cardano currently lags behind major players like Solana and Ethereum in terms of DeFi and stablecoin activities. According to DeFiLlama data, Cardano ranks 46th in global stablecoin activity with a market cap of around $31.3 million, and the total value of assets locked on the network for DeFi activities is less than $400 million.
Some community members have expressed concerns about the potential impact of selling $100 million worth of ADA on the token’s price. However, Hoskinson dismissed these fears, stating that Cardano’s liquidity is sufficient to handle such a transaction without significantly impacting the market.
He explained that the markets are deep enough to absorb the sale without causing major price fluctuations, and the perception of a large sale might actually create more volatility than the sale itself. Hoskinson believes that the bullish sentiment surrounding Cardano DeFi would offset any potential price pressure from the sale.
In conclusion, the proposed treasury shift within the Cardano ecosystem could be a significant step towards strengthening its DeFi and stablecoin sectors. By strategically allocating funds towards stablecoins and Bitcoin, Cardano aims to address its current weaknesses and enhance its competitiveness in the rapidly evolving cryptocurrency landscape.