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Future Hydra Upgrade Makes Cardano a Speculative Buy

Cardano (CCC:ADA-USD) software engineer Sebastian Nagel estimated in September 2021 that the release date for IOHK’s Hydra upgrade would happen between 6 and 12 months.

A concept coin for Cardano (ADA).
A concept coin for Cardano (ADA).

Source: Shutterstock

If that is true, that puts its launch sometime in 2022. That would do wonders for the cryptocurrency’s price, which lost around 57% of its value from its September all-time high of $3.10 through the end of 2021, which closed at $1.31.

Over the same period, Solana (CCC:SOL-USD) — it and Cardano are my two favorite cryptocurrencies because they deliver actual utility — was up 16.5%. As a result, Solana is the fifth-largest cryptocurrency with a market capitalization of $52.2 billion. This is $8 billion higher than Cardano in sixth place.

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If Cardano wants to revisit $3 in 2022, it will need some good news. Fortunately, Hydra looks like just the ticket. Here’s why.

Hydra Gives Cardano Processing Speed

In early November, IOHK Chief Executive Officer and Cardano founder, Charles Hoskinson, was asked a question about Hydra, its layer-two scaling solution.

He stated, “We are going to keep adding resources to Hydra, and we’ve been trying to identify some teams so we can parallelize the workstream because it’s such a high commercial priority. And it’s going to be very important that we’ll be able to offload a large number of the transaction traffic that’s going to come from all of the apps that are coming.”

If everything goes as planned, the future could see the Cardano network processing up to 1 million transactions per second (TPS). Considering Visa (NYSE:V) processes approximately 24,000 TPS, it’s a massive step up in scalability.

But that’s a big if.

Solana currently processes around 65,000 TPS. It’s considered one of, if not the fastest, blockchains. Were Cardano to deliver transaction speeds 15x faster than Solana and 41x faster than Visa, it wouldn’t take long for it to pass the former’s market cap.

As a result of Hydra’s potential, 2022 price estimates for Cardano range from just over $2 to $4.31, according to InvestorPlace’s Brenden Rearick. That was in early November. In late December, InvestorPlace Assistant News Writer Shrey Dua reported prices as high as $15.17 for Cardano in 2022.

That last one has got to be a best-case scenario for Cardano and Hydra.

Here’s How it Will Probably Play Out

My InvestorPlace colleague, Josh Enomoto, recently compared Cardano to Austin, Texas. You’ll have to read his commentary to understand how it’s a fitting comparison.

One particular line caught my interest: Cardano could be a quicker, faster, safer, higher, deeper blockchain. But I’m almost certain it can’t be all these things and cheaper.”

Ultimately, Josh argues that were Cardano to become technically superior to Ethereum (CCC:ETH-USD), it would come with higher costs due to the very nature of distributed decentralized systems.

Now, where I might deviate from my colleague’s assessment is to say that even if all of this played out as Josh suggests, that doesn’t mean the price of ADA-USD won’t move considerably higher once Hydra is launched later this year.

Of course, it also seems ridiculous to think Cardano will trade at $15 by the end of 2022, a 1,036% increase from today’s price of $1.32. It’s just not happening. However, since mid-February, ADA-USD has traded above $1, suggesting that it would take a terrible piece of news to send it below this artificial floor price.

Therefore, with the possibility of Hydra boosting its transaction processing speed in late 2021 or early 2022, it seems that buying at current prices wouldn’t be a bad move on the part of speculative investors.

While I like its partnership with the Ethiopian government to create a blockchain-based student performance tracking system, I am not a speculative investor. So, you won’t see me buying just yet.

If you are speculative by nature, I think buying its crypto before launch makes a great deal of sense. However, if you’re like me, I’d wait until after the Hydra upgrade drops. Then you can assess what it means for Cardano’s future.

Until then, we don’t know.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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