Key Insights:
- Cardano plans to convert $100M of ADA into Bitcoin and stablecoins to diversify its treasury.
- Hoskinson envisions generating $5-10M per year for ADA buybacks, strengthening the ecosystem.
- Solana’s co-founder criticizes Cardano’s strategy, but Hoskinson stands by it for long-term growth.
Cardano is aiming to ramp up its decentralized finance (DeFi) efforts by making an ambitious proposal to diversify its treasury of more than $1.2 billion. Charles Hoskinson, the founder of Cardano, proposes to spend 100 million ADA on exchanging it to Bitcoin and stablecoins.
Although the community has reacted differently to this move, Hoskinson is optimistic that this approach will take Cardano to greater heights in the crypto world.
Cardano’s Treasury Diversification Strategy
Hoskinson has proposed to transform part of the Cardano treasury into Bitcoin and stablecoins in a bid to increase the liquidity and sustainability of the Cardano network. The proposal would see the conversion of around 100 million dollars of ADA into these assets, which is roughly 5-10% of the total treasury.
The move will not only diversify the treasury but also expand the DeFi capabilities of the network, which Hoskinson feels Cardano has not done well in.
The reasoning behind this suggestion is that it will give Cardano an inflation hedge via Bitcoin and increase the liquidity of the ecosystem via stablecoins. The income earned on these assets would be utilized in acquiring additional ADA, a step that would aid in stabilising the price by establishing a consistent buyback system.
Hoskinson is aiming at purchasing back 5-10 million dollars’ worth of ADA per year that would be used to stabilize and even increase the price of the token.
Although this is a positive prospect, this plan has not been met with positive reception by the Cardano community.
Other members are worried that selling ADA to buy Bitcoin would have adverse effects on the price of the token. Nevertheless, Hoskinson claims that the Cardano market is too big to be affected by the divestment in a negative way.
Mixed Reactions Within the Cardano Community
This suggestion has caused a raging debate among the Cardano community, with some of its members supporting the ambitious vision of Hoskinson, and others being cautious.
The opponents of the plan say that the selling of ADA may exert a downward pressure on its price, particularly in the short term. Such critics are afraid that purchasing a substantial part of the treasury with Bitcoin and stablecoins would lead to market instability.
Although Hoskinson is adamant in his view that this treasury plan is critical to the future of Cardano, Anatoly Yakovenko, the co-founder of Solana, has spoken out against it.
Yakovenko claims that blockchain projects need to concentrate on the U.S. Treasury bills rather than on Bitcoin. He wonders why a blockchain network would handle Bitcoin on behalf of the users when they could own the asset.
In spite of these criticisms, Hoskinson justifies his proposal as a move that the Cardano network needs to make. He refers to the growing significance of DeFi and Bitcoin as a store of value in the wider blockchain space.
Hoskinson is convinced that the inclusion of Bitcoin in the treasury of Cardano will not only diversify the assets of the network but also demonstrate the desire to innovate and develop over the long term.
In addition, Hoskinson claims that the revenue produced by these assets may be used to support continuous ADA buybacks, which would have a direct positive impact on the value and liquidity of the token. This may be the trigger to get new investors and enhance the position of Cardano in the crypto sphere.
Cardano’s Growing DeFi Ambitions and Future Plans
The move to add more Bitcoin and stablecoins to the treasury is prompted by the fact that Cardano is eyeing a wider DeFi operation. Hoskinson has already complained about the absence of stablecoin adoption on the Cardano network, where only 33 million of stablecoins are now deployed.
This weakness constrains the possibilities of the DeFi ecosystem of Cardano, which is still behind other blockchain networks, such as Ethereum and Solana.
Diversifying the treasury will allow Hoskinson to generate new capital inflow into the Cardano ecosystem, which may encourage more developers and projects interested in building on it.
The idea is to make Cardano a major player in the DeFi market, and have a healthy and liquid market of stablecoins and other crypto assets.
Hoskinson also has big plans about the future of Cardano, and one of them is that the total value locked (TVL) on the platform will reach over $1 billion. Also, he wants to increase the issuance of stablecoins to between 250 million and 300 million in the next few years.
The accomplishment of these milestones will need a strategic plan and the treasury diversification proposal is viewed as one of the major steps towards the accomplishment of these goals.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
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