The largest U.S. cryptocurrency exchange, Coinbase, launched Cardano ($ADA.X) staking on its platform this week.
Staking is a way to earn rewards on your crypto. As a proof-of-stake cryptocurrency, Cardano’s network is not secured by mining, but rather by people contributing a portion of their $ADA.X holdings to the network. As a reward, they receive a share of the newly minted ($ADA.X).
Staking can be a lucrative way to “go long” on crypto assets – with investors able to pare the upside and downside of a token while accruing interest on it. Exchanges such as Coinbase offer staking options to allow investors who want to stake their coins to earn these rewards, lesser a fee they take.
Cardano joins Ethereum ($ETH.X), DAI ($DAI.X), Tezos ($XTZ.X), and Cosmos ($ATOM.X) on Coinbase’s yield-earning crypto list. Coinbase says it estimates users who stake Cardano will receive an APY of 3.75% on their assets, which will be paid every five to seven days.
Following the announcement, $ADA.X rose by 13%. This morning, however, the token fell again, trading for $1.09.
Coinbase’s support has helped $ADA.X’s near-term price action, but Cardano’s graphs have looked – like many other cryptos – down and to the left in recent months. Its falling price isn’t just related to changing sentiments in the broader market, either: the network has been criticized on occasion for its structural issues. Namely, when network faced major congestion after adding smart contract to its network last year. It also faced problems when decentralized exchange SundaeSwap brought the network to a standstill after its launch,causing confusion and frustration among users trying to perform swaps and invest in the protocol’s token, $SUNDAE.
In spite of Cardano’s enormous promise, the network places #21 in chains ranked by TVL, with only $412 million circulating around its DeFi ecosystem on just seven protocols. At that rate, Cardano is one of the most overvalued chains – at a 85.65x mktcap/TVL ratio. So while Coinbase’s support might induce investor confidence, Cardano still has to deliver in order to sustain itself as a chain justified in having a top 10 spot.