Hoskinson's proposal to transfer the ADA treasury to Bitcoin and stablecoins aims to revitalize Cardano's DeFi presence amid the competitive blockchain landscape.
June 30, 2025, at 20:00
On June 13, Charles Hoskinson, co-founder of Ethereum (ETH) and founder of Cardano (ADA), made a bold proposal. To put Cardano on the map of decentralized finance (DeFi), the blockchain ecosystem should establish a sovereign fund.
Specifically, converting 5% to 10% of the ADA treasury (approximately $1.2 billion) into more robust assets, such as Bitcoin or tokenized dollars in the form of stablecoins. Let's analyze the implications of this proposal for Cardano and the cryptocurrency market in general.
The goal of a sovereign fund
Sovereign funds are typically associated with governments. One example: oil-rich Norway has the Government Pension Fund Global (GPFG), from which the government withdraws an amount equivalent to about 20% of the country's budget. While oil and gas production has been the foundation for the fund's growth, this sector now represents less than half of the fund's total value.
Instead, the fund grows from exposure to equities — about 9,000 companies worldwide — along with exposure to fixed income, such as bonds (debt issued by governments), real estate, and renewable infrastructure. From 2019 to 2024, Norway's sovereign fund doubled in value, from $996 billion to nearly $2 trillion.
Therefore, the GPFG consistently captures gains from market returns in general, but also from the government's need to continue spending through debt. Hoskinson hopes to achieve similar gains through exposure to Bitcoin/stablecoins and then use those resources to acquire more ADA, which would drive the price of ADA up.
This strategy is solid for two reasons:
First of all, it is certain that the U.S. government will spend beyond its means, which will further erode people's purchasing power with the U.S. dollar. Already institutionalized through exchange-traded funds (ETFs), this means Bitcoin will continue to serve as a wealth safeguard asset due to its fixed scarcity and proof-of-work security. Similarly, beyond the potential selling pressure exerted by Bitcoin miners, Bitcoin is not an asset that concerns itself with profits, unlike stocks.
Secondly, exposure to stablecoins is exposure to the very sovereignty of the U.S. government. Both Circle (USDC) and Tether (USDT) have massive exposure to U.S. Treasury securities. While Tether is approaching $120 billion in U.S. Treasury securities, generating over $1 billion in profits in the first quarter, the Circle Reserve Fund holds 49.64% in U.S. Treasury debt and 50.36% in repurchase agreements of U.S. Treasury securities.
Due to this exposure, these two leading stablecoin firms are now significant generators of demand for U.S. government bonds. And as they generate yield, the U.S. government is pleased, as stablecoins extend financial hegemony into the digital realm. Furthermore, this keeps U.S. Treasury yields at a manageable level.
The current U.S. Secretary of Commerce, Howard Lutnick, made this clear back in April 2024 when he was CEO of Cantor Fitzgerald:
The hegemony of the dollar is crucial for the United States of America. It's important for us, for our economy... That's why I'm a fan of properly backed stablecoins. I'm a fan of Tether. I'm a fan of Circle.
Cardano's exposure to stablecoins would also be timely because it is likely the first blockchain asset to receive comprehensive regulation.
And what about Cardano's (ADA) performance?
Year-to-date, ADA has fallen nearly 35%, but is up 56% over one year. Of its maximum supply of 45 billion ADA, Cardano has 35.36 billion ADA in circulation, leaving many tokens still to be released and potentially reducing the price of ADA if demand is not met. Cardano's annual inflation rate is approximately 2%, which is, by the way, the inflation target of the Federal Reserve.
The ADA treasury allocation is nearly 31%, of which 5% to 10% would be converted into Bitcoin or stablecoins. As a proof-of-stake blockchain, Cardano grants 80% of staking rewards to validators, while 20% is reserved for the treasury.
Considering Cardano's relatively high inflation rate of 2% (Bitcoin's is 0.82%), converting more ADA into Bitcoin/stablecoin would represent significant selling pressure, which would depress the price of ADA. However, Hoskinson believes this could be mitigated.
Specifically, if 140 million ADA are converted into BTC/stablecoins, such purchases would be distributed over a week through over-the-counter (OTC) trading desks, utilizing a time-weighted average price (TWAP) strategy. The TWAP relies on custom runtime settings to control execution timing and minimize market disruption.
Notably, Michael Saylor uses this strategy for BTC accumulation from Strategy. After all, since the price of MSTR shares is an indirect exposure to Bitcoin, it is in Saylor's interest to go unnoticed during order execution. Similarly, Hoskinson would have to maintain ADA's average market price to avoid alarming the market.
In the long run, if the gains from exposure to BTC and stablecoins lead to ADA buybacks — similar to stock buybacks — Hoskinson could gain the same benefit that Saylor gets from MSTR shares, which regularly outperform Bitcoin itself due to Saylor's favorable access to credit markets.
And what about Cardano's main demand?
As a dissident original co-founder of Ethereum, Hoskinson launched Cardano as a robust and more profit-oriented alternative. To become a blockchain-based ecosystem for DeFi, Cardano needed to first complete its smart contract functionality. This was made possible with the completion of the Goguen era, consisting of the hard forks Allegra, Mary, and Alonzo, in September 2021.
Still in the Basho scaling phase, prior to the Voltaire governance era, Cardano's blockchain performance is significantly lagging behind the top 10, led by Solana. According to ChainSpect, Cardano ranks 34th in real-time transactions per second (TPS), with 0.26 tx/s, compared to its theoretical maximum TPS of 18.02 tx/s.
This gives the chain a finality of 2 minutes compared to Solana's 12.8 seconds. Needless to say, until Basho is completed, particularly the layer 2 Hydra solution, this is not a competitive position. It also does not inspire confidence that Cardano is three years older than Solana.
Combined with the fragmentation of the cryptocurrency market and a devastating series of bankruptcies in 2022, culminating in the collapse of FTX, Cardano holds only $267.5 million in its DeFi apps, compared to $8.3 billion on Solana, or $62.7 billion locked in Ethereum dApps.
Furthermore, stablecoins represent only $31.44 million in Cardano
Considering the decline in earnings in the altcoin market overall, as more launched tokens dilute capital, having a price anchor for the stablecoin is more important than ever. This would make lending in dApps less risky, with more predictable interest payments.
Similarly, stablecoins on decentralized exchanges (DEXs) offer less slippage and reduced impermanent losses, providing stable yield farming in the process. An influx of liquidity in stablecoins (~$100 million) would likely increase Cardano's dApp activity. After all, it would be a much safer exposure than betting on widely fraudulent memecoins.
Cardano's main dApp in unique active wallets (UAW) is a DEX aggregator called DexHunter, while the lending dApp Lenfi holds the most value, at $11.62 million. Clearly, these numbers are insignificant compared to dApp activity on the top 10 blockchains, which is why Hoskinson's initiative is much needed.
The final result
At the end of May, the Ethereum Foundation borrowed $2 million in stablecoins from Aave with wrapped ETH (wETH) as collateral. This dynamic, in which there was no need to sell ETH, points to a more mature DeFi ecosystem, which Cardano has yet to approach.
However, to achieve this maturity, Cardano needs to start making bold moves. Allocating part of the ADA treasury into Bitcoin and stablecoins is a step in the right direction. At first glance, it may seem that Hoskinson favors BTC over ADA with this measure, but it is a mix of categories.
It is widely recognized that Bitcoin acts as a store of value, rather than a general-purpose smart contract blockchain like Cardano. Ultimately, the current Trump administration has clearly signaled that stablecoins will be a sufficient alternative to a canceled CBDC. It is during this period that Cardano needs to stimulate activity, without waiting for the completion of its scalability era.
