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Key Takeaways:
- Charles Hoskinson proposes converting 140 million ADA into USDM to address Cardano’s stablecoin liquidity gap and generate non-inflationary treasury revenue.
- Community remains divided, with critics warning of sell pressure and suggesting a crypto-backed stablecoin alternative to support Cardano’s DeFi ecosystem.
Cardano (ADA) is grappling with mounting concerns in the DeFi landscape as its stablecoin liquidity remains notably limited, despite favorable on-chain metrics. The network recently witnessed a 7.58% price drop, bringing ADA to $0.6363, raising alarm among investors.
Addressing the liquidity shortfall, Cardano co-founder Charles Hoskinson took to X (formerly Twitter) to defend the network’s DeFi viability. Hoskinson acknowledged that Cardano’s stablecoin market cap is lagging behind its DeFi total value locked (TVL) when compared to competing blockchains. He described the issue as a “false narrative” but admitted that the lack of stablecoins is “killing Cardano.”
The markets are deep. We could convert 140 million ada over a week or so without moving the market using OTCs and TWAPs. It's a false narrative.
— Charles Hoskinson (@IOHK_Charles) June 12, 2025
What is killing Cardano is our stablecoin situation. This would start to solve it. Generate some non-inflationary revenue for the… pic.twitter.com/vSXetbK9sv
In a bid to rectify the imbalance, Hoskinson proposed converting 140 million ADA from the treasury into USDM, Cardano’s fiat-backed stablecoin. He argued that the conversion, executed gradually through OTC trades and TWAPs (Time-Weighted Average Prices), would avoid market disruption and simultaneously generate non-inflationary income for the Cardano treasury.
“This would start to solve it,” Hoskinson asserted. “It would generate some non-inflationary revenue for the treasury and help build up our DeFi economy.”
However, the proposal has stirred division within the Cardano community. Critics, including the pseudonymous Cardano Whale, raised concerns over potential market pressure from offloading such a substantial amount of ADA. Some community members warned that the announcement alone could exacerbate ADA’s recent decline, which saw a 5% drop in just 24 hours.
Also Read: Cardano (ADA) Joins Nasdaq Crypto Index
As an alternative, several voices have called for a more DeFi-native solution: minting a crypto-backed stablecoin using ADA as collateral and pairing it with ADA in liquidity pools on Cardano DEXs. Proponents argue that this method would strengthen DeFi liquidity without triggering downward price pressure.
Despite the internal debate, Cardano recently achieved a milestone with its inclusion in Nasdaq’s revamped Crypto US Settlement Price Index, indicating growing institutional attention. However, with the stablecoin challenge now front and center, the blockchain’s next steps could prove pivotal in shaping its DeFi future.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses
