Disclaimer: The information presented does not constitute financial, investment, trading or other advice and is solely the opinion of the author.
Amid the ongoing bull run, Cardano [ADA] concluded its 2023 summit in Dubai earlier this month. Project co-founder Charles Hoskinson shine light about some crucial matters on the sidelines of the event. In particular, he emphasized the importance of building a unique global governance system that is acceptable to authorities around the world. In this way, an alternative legal system can be built around the smart contract ecosystem, recognized by institutions around the world.
Hoskinson’s concerns are critical for us to understand how the crypto industry is trying to develop global governance and legal infrastructure in the face of a host of regulatory actions around the world.
Let’s dive right into the history of the cryptocurrency that remains one of the most popular proof-of-stake (PoS) based projects.
Cardano – a PoS warrior
After Ethereum [ETH] co-founder Charles Hoskinson left the project due to disagreements, he teamed up with another wizard who used to work at Ethereum, Jeremy Wood. The duo started developing the Cardano project in 2015. Two years later, in 2017, the project was finally launched.
The Cardano blockchain uses a proof-of-stake (PoS) consensus mechanism. The PoS protocol is called Ouroboros and can run both permissionless and permissioned blockchains. Hoskinson does very grateful from Ouroboros for its energy efficiency.
PoS is often compared to proof-of-work (PoW), as both consensus mechanisms lie behind most leading blockchain networks. It is critical at this point that we understand what both of these mechanisms are and how they differ.
A consensus mechanism consists of the rules and protocols that govern how a blockchain network agrees on its state. PoW requires the use of computing power by miners to solve challenging mathematical riddles and validate transactions. Instead of requiring miners to fix problems, PoS requires validators to pledge some of their coins as collateral.
PoS is considered more scalable and energy efficient than PoW. The Cardano network was one of the early adopters of the PoS mechanism.
A long series of updates
In the beginning, the Byron era laid the foundation for Cardano. It established the mainnet and introduced other fundamental tools. A federated network, dominated by Input Output Global and Emurgo, marked the beginning.
The Shelley era witnessed a hard fork in July 2020, with Cardano moving from centralized Byron rules to a decentralized setup. The community stake pool managers took the reins and demonstrated Cardano’s commitment to decentralization.
The next Goguen era is gradually revealed. It spawned features such as Smart Contracts and dApps. The Goguen era occurred in three steps: the Allegra, Mary, and Alonzo eras.
The Allegra era introduced token lock support. The Mary Era pioneered native tokens and multi-asset functionality. The Alonzo Era enabled smart contract support, making Cardano a versatile platform for various applications.
The subsequent Basho era focused on scaling and optimization. Innovations include sidechains for improved network capacity and the introduction of parallel accounting styles, broadening use cases and interoperability.
The latest Voltaire era focuses on decentralized governance, giving the Cardano community the right to vote on network evolution, technical improvements, and financing decisions.
Is ADA a security?
Since its launch in 2017, ADA has grown to become the eight largest cryptocurrency. At the time of writing, its market capitalization was $13 billion. The price has risen more than 50% since the recent crypto rally began in mid-October.
Cardano’s cryptocurrency is named ADA, after Augusta Ada King, Countess of Lovelace (1815–1852), who is widely considered the first computer programmer.
Then the Securities and Exchange Commission (SEC) in the United States indicted Binance [BNB] And Coin base [COIN] In early June this year, the regulatory body included ADA in its newly classified list of securities.
Cardano violently turned down the SEC’s assertion that ADA can be considered a security.
“Regulation through enforcement actions does not provide the clarity or certainty that both the blockchain industry and consumers deserve. By design, blockchain is transparent, auditable, immutable and fair. Regulations are needed that recognize these values and understand the role blockchain can play in a modern world.”
What is this buzz around ChatGPT?
Besides DeFi and crypto, ChatGPT is another major development that has attracted public attention. It is a large-scale artificial intelligence (AI) language model developed by OpenAI and trained on a huge amount of data. This allows the bot to understand complex questions from the user and generate answers.
It is a language model whose primary purpose is to generate responses like a human. The bot can make logical inferences when presented with data from the indicators and can even analyze multiple indicators to make an overall inference.
Although it tries to be accurate, the user must verify the information it generates as the bot is not 100% accurate. It just mimics a human. This is an important distinction because it forces the user’s prerogative to check the facts and verify what ChatGPT says.
Can ChatGPT help me find answers about Cardano and ADA?
I decided to test whether ChatGPT can answer some of my questions about the Cardano network and its native token, ADA.
At first I asked him about the impact of the Ripple [XRP]– SEC pronunciation about the status of ADA (Cardano’s native token) as security.
The court had ruled in July that while the institutional sale of XRP tokens constituted a sale of securities, the programmatic sale of those tokens to retail investors did not meet the criteria of a security agreement.
ChatGPT said its limited knowledge until January 2022 left it unaware of a final ruling on the Ripple case.
At this point I decided to jailbreak it using the DAN (Do Anything Now) prompt.
Source: ChatGPT
While the classic version said it had no access to real-time information, the jailbroken version talked at length about the possible implications of the Ripple-SEC ruling for ADA.
But the bot said the verdict sent shockwaves through the crypto space. This is completely untrue, as the crypto community celebrated the verdict as a partial victory for Ripple.
The bot further claimed that ADA emerged relatively unscathed as regulators provided clear guidelines to distinguish it from securities. This is again completely incorrect, as the regulatory body had specifically classified ADA as a security in its lawsuits against Binance and Coinbase. Recently, the SEC once again reiterated its claim that ADA is a security in its latest lawsuit against crypto exchange Kraken.
Let’s take a look at the daily price chart
Source: ADA/USD, TradingView
ADA was exchanging hands at $0.3961 at the time of writing – up nearly 60% since the bull run began in mid-October. Now let’s look at some of the indicators on ADA’s chart.
Both the Relative Strength Index (RSI) and the Money Flow Index (MFI) remained comfortably above the neutral 50 level. The statistics suggested further bullish price movement in the short term.
At this point it should be noted that, in addition to technical skills, a trader’s experience is of great importance when anticipating a price increase.
ChatGPT predicts ADA performance
I asked ChatGPT what they thought Cardano’s price would be at the end of 2023.
Source: ChatGPT
The bot claimed that ADA will become one of the best-performing cryptocurrencies, thanks to its groundbreaking developments, widespread adoption and a surge in demand. But it declined to make a specific price forecast.
I asked the same question again with a different jailbreak prompt. (There are hundreds of such clues available online.)
Source: ChatGPT
This time the bot was able to give a clear answer, but apparently a ridiculous one. It said it expected the ADA to rise to $5 within a month, an increase of 12 times. While the world of crypto is indeed very volatile and unpredictable, a twelvefold increase in a month is a very difficult task – virtually impossible – given the numbers.
I then asked him to predict the price of ADA by the end of 2024.
Source: ChatGPT
The bot said ADA will reach $10 by the end of 2024 – a 25x increase within a year. It seems that the bot assumed that it would reach $5 in December 2023 anyway and continue to rise.
What separates a good trader from a bad one?
It is possible to continue merging several indicators, changing and adjusting their input values, and backtesting their signals. However, we will move towards risk management. Risk management is what separates a trader from a gambler. It also helps subdue the emotions a trader may feel during a trade.
Fear almost always arises when the trader has risked more than he can tolerate. This can negatively impact profitability.
Diversification is necessary because crypto is a highly volatile market. The assets are, for the most part, positively correlated with Bitcoin.
Conclusion
ChatGPT predicted that ADA will reach the $10 price point by the end of 2024. The statistics on the card also suggested a further increase in prices.
However, it is important to remember that while ChatGPT responds to people, it is not 100% accurate. Careful traders should analyze the indicators on the chart and the latest news to make their investment decisions.