Hello Metrics Enthusiasts!

Laura & Sooraj here again!

Thanks for your votes last week.

Remember we mentioned Cardano is up next?

Well, the time has come!

This week, we’re shining the spotlight on Cardano (ADA), the second star from our poll results.

But before we dive in:

A HUGE THANK YOU for all your votes!

Your voices have been heard, and the results are in.

Next week, we're setting our sights on Tezos (XTZ). Exciting, right?

A shoutout to Leo Treasure, a valued member of our elite group of metrics enthusiasts!

Leo is curious about the impact of new staking and adaptive issuance on Tezos' price.

Great question, Leo!

We’ll definitely explore that.

So, if you have questions like Leo, don’t be shy!

Take part in the poll or shoot us an email. We love diving deep into your queries!

Until then, enjoy the Cardano exploration!

What you’ll learn today

• Insight 1: With a robust Market Cap of $9.24 Billion, what's driving Cardano’s growth?

• Insight 2: IOG has announced the launch of “Midnight Sidechain”. What does it mean for the normal ADA hodlers and Stake pool operators?

• Insight 3: With a 63.32% Staking Ratio and a whopping 1.23 million Staking Wallets, how secure and participative is the Cardano network truly?

1. Market Overview

Circulating Market Cap

This metric serves as an indicator for evaluating the asset's relative size in the broader cryptocurrency market.

For the past two years, the market cap of Cardano/ADA has seen a consistent decline.

Current value: $9.24 Billion

90-Day Trend: -8.10%

To provide additional context, Cardano's circulating market cap is down by >90% from its all-time high.

This performance contrasts with industry heavyweights like Bitcoin and Ethereum, which are down by 50-60% from their peak values.

Daily Volume

The daily trading volume of a crypto asset indicates both market interest and market liquidity. Higher volume corresponds to lower volatility, and vice versa.

Current value: $104 million

It falls short of Ethereum's high levels of $4 billion, and trailing behind Solana's $174 million.

2. Supply and Demand

Token Inflation Rate

Inflation Rate's Significance

A high rate could dilute the token's worth, turning it into something less exciting. A low rate, however, could drive up both demand and price.

Current value: +2.59% Token Supply Growth

In a landscape where ETH shows a modest inflation rate of 0.36%, ADA has a notably higher rate of 2.59%.

However, this seems moderate compared to SOL's 7.3%.

Annualized Fee Revenue

Annualized Fee Revenue serves as a gauge of the financial health of a protocol. Elevated revenue figures point to vibrant transactional activity within the network, whereas diminished numbers could hint at waning user engagement.

Current value: $2.8 Million

In terms of annualized fee revenue, Ethereum leads with a substantial $2 billion, while Cardano's $2.8 million pales in comparison.

On the Cardano network, fees generated from transactions are pooled and then distributed. Currently, 20% of these fees go to the treasury, and the remaining 80% is allocated to reward staking operators and delegators.

Solana registers at $14.22 million.

Supply/Demand (S/D) ratio

The S/D ratio measures the network's financial balance. A ratio close to 1 indicates fee revenue and reward payouts are nearly equal. A ratio below 1 implies more rewards are paid out than fees earned, potentially questioning the token's long-term value if sustained.

Current value:

▪️Annual Fee Revenue: $2.8 million

▪️Rewards Per Year: $181.8 million

▪️Ratio: 0.014

An S/D ratio of 0.014 indicates that Cardano's rewards per year are approximately 65 times greater than its annual fee revenue.

Meaning, from a fundamental supply-demand perspective, there is 65 times more supply than demand.

Valuation to Demand (V/D) Ratio

Here we are looking at the valuation-to-demand ratio. So what does it mean?

All L1 token prices are based on optimism about the level of adoption achievable by the network in the future.

The market cap of L1 tokens in dollar terms suggests the speculative price people are willing to pay for future adoption.

However, the transaction fees paid in the last 365 days in dollar terms suggest the actual demand for the L1 network.

So let's take a look at how many times these networks are valued today compared to the transaction fees paid in the last 365 days.

Annualized Fee Revenue: $2.8 million

Current Market Cap: $9.24 Billion

The total market cap of Cardano/ADA is being valued at approximately 3300 times the total fees paid in the last 365 days.

To give you some context

Ethereum is valued at 95.74 times the total fees paid in the last 365 days.

Solana is valued at 554 times the total fees paid in the last 365 days.

Thus, among the given examples, Cardano has the highest valuation in relation to its annualised fee revenue.

This can be interpreted in two ways:

Higher Speculation: This might suggest greater speculative activity around ADA, with increased optimism about Cardano's future, leading to less perceived risk.

or

Overvaluation: ADA could be overvalued compared to its actual utility.

🗳️ What's Next? Your Vote Counts!

3. Security & Participation: Key Staking Metrics

Staking Ratio

Staking ratio can provide insights into the level of network participation among token holders, as well as the overall health and security of the network.

Current value: Cardano Staking Ratio: 63.32%

90-Day Trend: +1.15%

When compared to Ethereum's 20.51% and Solana's 71.19%, the staking ratio of Cardano looks healthy.

Staking Market Cap

The staking market cap reflects the total value of staked tokens and indicates network security and participant commitment. A high staking market cap suggests a more secure and stable network.

Current value: $ 6.08 Billion

With a staking market capitalization of $6.08 billion, Cardano ranks among the top three assets by staking market cap. When considering only the tokens in circulation that are being staked, Cardano is second in staking market cap.

90 Day Trend: -5.11%

The -5.11% decrease in Cardano's Staking Market Cap over the past three months is primarily attributable to the price depreciation of ADA.

Staking Wallets

The number of Staking Wallets is more than a count; it indicates network participation and decentralization. A higher number suggests an active, engaged community, while a lower number might indicate centralized control or lesser community involvement.

Current value: 1.23 million Staking Wallets 

This figure positions Cardano as the blockchain with the highest number of staking wallets. (Though it doesn't necessarily mean that all 1.23 million are individual stakers)

Contrastingly, Ethereum has 781,320 staking wallets, a number significantly lower than Cardano's approximate 1.3 million.

90-Day Trend: +8.46%

What do these Key Staking Metrics mean for a ADA Hodler?

A high staking market cap and staking ratio suggest robust network security and robust community participation. In contrast, Solana lags behind both Ethereum and Cardano in the number of staking wallets, indicating potential for growth.

4. Reward Metrics

Reward Rate

It is the current annualised average reward rate across the network. This is the rate at which stakers can earn rewards for participating in network consensus and/or governance.

Current value: Cardano’s current reward rate is approximately 2.99%.

What This Means for ADA Stakers: A 3% reward rate is moderate, providing a consistent, though not extraordinary, incentive for stakers and validators to engage with the network.

Reward Stability

This is computed by comparing the realized reward rate over the last 365 days to the expected reward rate 365 days ago.

This metric tries to give you an indication of how reliable the expected reward rate for this asset is.

Current value: 90.58%

According to stakingrewards.com Cardano’s reward stability is relatively high, with minor fluctuations observed over the past 30-90 days.

Remember: this metric may not be that accurate as it is currently in beta, and continuously being worked and improved upon to better the scoring framework.

What This Means for ADA Stakers: High reward stability means that the stakers can have confidence in the consistency of their staking returns over time.

5. Risk

Decentralization

A. Network

Cardano has one of the most decentralised network with more than 3,000 validator nodes and the highest MAV of 37. This shows a robust and decentralised networking layer compared to other L1s.

B. Initial Token Distribution

Cardano has fair initial token distribution. Something comparable to protocols like Ethereum or Tezos.

C. Governance

Even though Cardano aims for a decentralized governance model, its current governance structure is centralized. Cardano's governance is organized around seven keys, each with distinct ownership:

1. Three keys are held by IOG (Input Output Global), formerly known as IOHK (Input Output Hong Kong).

2. Two keys are held by the Cardano Foundation.

3. Two keys are held by Emurgo.

A decision requires the agreement of at least five of these seven keys, giving IOG an effective veto power. These governance keys wield significant influence over the network's future.

This centralization is expected to diminish once the Voltaire upgrade is implemented next year. A non-incentivized governance testnet, known as SanchoNet, is already operational.

Fully Diluted Market Cap

The Fully Diluted Market Cap (FDV) indicates potential value dilution. If any tokens are set to enter circulation, this could exert downward pressure on the asset's price.

Current value: $11.7 billion

The gap between Cardano/ADA's current market cap and its FDV is around 2.6 billion or almost 28% of its total market cap.

Slashing

Cardano does not have slashing conditions, providing a risk-free environment for stakers.

Upcoming Unlocks

Upcoming unlocks can influence the token’s price as large amounts of tokens might enter the market.

Based on our research, there is no clear information on upcoming token unlocks in the Cardano network.

6. Conclusion: Narrative vs. Metrics

🧰 Your Toolbox - to boost your token metrics research

• CardanoScan.io: The premier block explorer for Cardano, providing detailed information on Cardano blocks, transactions, and addresses. It’s an invaluable tool for anyone looking to track transactions and monitor the network’s activity.

• StakingRewards.com: This platform remains a crucial resource for all things staking, offering detailed metrics on Cardano’s staking ratio, reward rates, and other pertinent data that can guide your staking decisions.

• AdaPools.org: A detailed and user-friendly Cardano staking pool statistics site. It provides real-time data on each staking pool’s performance, helping you make informed decisions on where to delegate your ADA.

This October sunset in the Netherlands is a gentle reminder to pause and appreciate the beauty amidst the chaos.

We're soaking in the inspiration for another week of deep dives into token metrics.

Until next week, enjoy your moments of tranquility and clarity!

Cheers,

Laura & Sooraj

#FollowTheMetricsNotTheHype