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Cardano (ADA) fell 4% on Friday as Cardano founder Charles Hoskinson proposed converting $100 million worth of ADA into stablecoins and Bitcoin (BTC) to boost stablecoin issuance in his ecosystem.
ADA drops 4% following Cardano treasury allocation proposal
Cardano co-founder Charles Hoskinson has suggested converting $100 million worth of ADA tokens into Bitcoin and stablecoins. In a YouTube video posted Friday, Hoskinson discussed Cardano's low stablecoin issuance within its DeFi ecosystem.
“Cardano has a disproportionately low stablecoin issuance ratio compared to our DeFi. It’s just under 10%,” Hoskinson said in the YouTube video.
According to data from DefiLlama, the Cardano network has approximately $31 million in stablecoins, compared to $273 million in total value locked (TVL). Hoskinson also noted that the Cardano Foundation treasury does not hold any yield-bearing instruments. This could be a major problem for Cardano, especially given the high market volatility in recent months, he said.
Citing the examples of sovereign wealth funds in Norway and Abu Dhabi, Hoskinson suggested that the Cardano ecosystem should generate returns on its treasury, which could be reinvested into the network. He noted that this initiative could improve the visibility of Cardano's native stablecoins and, ultimately, pave the way for their listing on an exchange.
However, critics argued that the token sale could cause ADA's price to decline further, as bearish sentiment was already on the rise. Hoskinson responded to the criticism, emphasizing that $100 million would not harm the network.
The proposed fund conversion aims to increase Cardano's stablecoin issuance ratio to around 33%, possibly up to 40%, from the current 10%. Under the plan, between $25 million and $50 million could be allocated to Bitcoin to boost Bitcoin-centric DeFi activity and attract yield-seeking players.
Hoskinson said he had drafted a 40-page document outlining the plan and distributed it to key members of the team who are currently reviewing it.
“We're going to look at it, and then we're going to syndicate it with many DeFi applications in the Cardano ecosystem and discuss its practical readiness,” Hoskinson added.
ADA targets $0.60 support after seeing rejection at the upper boundary of the descending channel
ADA fell 4% following rising military tensions in the Middle East between Israel and Iran. The altcoin suffered a rejection near the upper boundary of a key descending channel, reinforced by the confluence of the 100-day and 50-day simple moving averages (SMAs).
ADA/USDT Daily Chart
On the downside, ADA could find support at $0.60. Further downward pressure could push it back above the channel's lower boundary if the $0.60 support breaks down. On the upside, it will need to break above the channel's upper boundary to initiate a rally towards $0.84.
The Relative Strength Index (RSI) has been rejected at its neutral level and has fallen below its moving average. Meanwhile, the Stochastic Oscillator (Stoch) is testing its oversold line. A pullback to this area signals an acceleration of the downtrend.
