Charles Hoskinson's proposal to allocate 40 million ADA from the treasury to support DeFi and stablecoins is definitely an important and ambitious step, and the market reaction (ADA's drop by 6%) reflects the complexity and controversy of such a decision.
What's good about this proposal:
1. Attempt to revive DeFi in the Cardano ecosystem.
Cardano is lagging significantly behind Ethereum, Solana, and Avalanche in terms of TVL (Total Value Locked). Buying BTC and its own stablecoins could increase liquidity and interest from developers/investors.
2. Strengthening trust in Cardano stablecoins.
Backing with assets (like BTC) could make USDM, USDA, and iUSD more reliable. This potentially reduces systemic risks and helps compete with USDT/USDC/Dai.
3. Attracting attention and liquidity.
Even the buzz around the idea can lead to a surge in interest in DeFi projects and increase activity on the network.
Major risks and concerns:
1. Risk of excessive centralization of decisions.
Decisions on treasury expenditures, even if presented as decentralized, still largely depend on the will of Hoskinson and his circle. This undermines the principles of DAO.
2. Market risk and poor timing.
Purchasing BTC and stablecoins at market peaks or during volatility can lead to losses. And ADA remains highly correlated with the overall market.
3. Inefficient allocation of funds.
Instead of long-term investments in infrastructure, education, and auditing, funds are going to 'quick liquidity,' which may not bring lasting effects.
Possible consequences for the long-term price of ADA:
If successful:
Increased DeFi activity, growth in TVL, and mass adoption of stablecoins — all of this can lead to increased trust and, consequently, a rise in the price of ADA.
If it fails:
Loss of funds, decline in community trust, increased criticism of ecosystem governance, and user outflow → pressure on the price and potential downtrend.
Personal opinion:
This is a bold but high-risk initiative. Cardano has been in the role of a 'scientific blockchain' for too long, and the attempt to quickly catch up with the DeFi market seems like an aggressive marketing-financial move. If everything is implemented transparently, with strong community involvement and oversight, this could be a step towards maturity. But without a strong DeFi infrastructure and demand for stablecoins — it is just burning treasury resources.