Cardano Founder Proposes $100 Million ADA Conversion to Boost DeFi

Cardano (ADA) experienced a 4% dip on Friday following a proposal by its founder, Charles Hoskinson, to convert $100 million worth of ADA into stablecoins and Bitcoin (BTC). The aim is to invigorate the stablecoin issuance within Cardano’s decentralized finance (DeFi) ecosystem.

Cardano’s Treasury Allocation Proposal Triggers ADA Drop

Hoskinson unveiled the plan in a YouTube video, highlighting the relatively low stablecoin issuance within Cardano’s DeFi landscape. He noted that stablecoins represent less than 10% of Cardano’s DeFi, a figure he considers disproportionately low.

Data from DefiLlama indicates that approximately $31 million in stablecoins exist on the Cardano network, compared to a total value locked (TVL) of $273 million. Hoskinson also pointed out that the Cardano Foundation’s treasury currently lacks yield-generating instruments, a potential concern given recent market volatility.

Drawing inspiration from sovereign wealth funds like those of Norway and Abu Dhabi, Hoskinson suggested that Cardano’s ecosystem needs to generate returns on its treasury, which can then be reinvested into the network. He emphasized that this move could enhance the visibility of native Cardano stablecoins and potentially pave the way for exchange listings.

However, critics have voiced concerns that selling ADA tokens could further depress its price, given the already prevailing bearish sentiment. Hoskinson addressed this criticism, asserting that a $100 million conversion would not significantly harm the network.

The proposed conversion aims to increase Cardano’s stablecoin issuance ratio to approximately 33% or 40%, a substantial increase from its current 10%. As part of the plan, $25 million to $50 million could be allocated to Bitcoin in an effort to stimulate Bitcoin-centric DeFi activity and attract yield-seeking participants.

Hoskinson mentioned that he has drafted a 40-page document detailing the plan, which is currently under review by key team members.

“We’re going to review it and then we’re going to syndicate it with many of the DeFi applications in the Cardano ecosystem and have a discussion about its practical readiness,” Hoskinson added.

ADA Seeks Support at $0.60 After Facing Resistance

ADA’s 4% decline coincided with escalating tensions in the Middle East. The altcoin encountered resistance near the upper boundary of a key descending channel, reinforced by the convergence of the 100-day and 50-day Simple Moving Averages (SMAs).

On the downside, ADA may find support at $0.60. Further downward pressure could lead to a rebound at the lower boundary of the channel if the $0.60 support level fails. To the upside, ADA needs to surpass the upper boundary of the channel to initiate a rally towards $0.84.

The Relative Strength Index (RSI) experienced a rejection at its neutral level and has fallen below its moving average. Meanwhile, the Stochastic Oscillator (Stoch) is testing its oversold region line. A drop into the oversold region signals accelerating bearish momentum.

• Charles Hoskinson proposes converting $100 million in ADA to stablecoins and Bitcoin.
• The capital reallocation strategy aims to boost Cardano’s DeFi ecosystem.
• ADA has decreased by over 4% and is seeking support at $0.60.

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