Why did ADA fall into trouble in 2025? The truth behind these three years from market data

Executive Summary: The Gap Between Data and Narrative

Entering Q4 2025, the crypto market has shown clear structural divergence. Bitcoin (BTC) is priced at $87,220, Solana (SOL) at $123.92, while Cardano (ADA) hovers around $0.37, with an annual decline of 65.28%. For ongoing dollar-cost averaging (DCA) investors, a sharp question looms: why do some assets rebound during bear cycles while ADA becomes increasingly silent?

This article attempts to deconstruct the systemic reasons behind ADA’s poor performance over the past three years through cross-verification of on-chain data, technological fundamentals, and capital flows.

Part 1: Prediction Failures and the Huge Gap with Reality

The Truth About Price Targets

Many crypto content creators have publicly predicted ADA would reach a price range of $5 to $8 by 2025. Today, the actual price ($0.37) is only about 7% to 8% of the lower bound of that target. This is not mere market volatility but a fundamental failure of the prediction models.

When predictions fall short, the common explanation is “macro environment is poor, altcoins are generally weak.” At first glance, this seems plausible—many platform tokens and Layer 1 blockchains have underperformed in this cycle. But a closer look at market structure reveals that divergence is far more intense than imagined.

Solana experienced a devastating blow from the FTX ecosystem but achieved a strong V-shaped reversal from 2023 to 2025. During the same period, the Solana ecosystem attracted far more developers and users than Cardano. This indicates that macro environment arguments alone cannot explain why some projects break out against the trend while others continue to weaken.

Volatility Characteristics: “Faster Down, Weaker Up”

Supporters often argue that although ADA’s gains are limited, its volatility is lower than Solana’s, making it more suitable for risk-averse investors. However, risk-adjusted return metrics (like Sharpe ratio) do not support this view.

Actual data shows ADA exhibits typical “downward amplification and upward suppression” features:

• During market corrections, when Bitcoin drops 2%, ADA often falls 8-10%
• During rebounds, ADA tends to lag in rallying, with capital flowing preferentially into assets with strong narratives (e.g., AI concepts, Meme coins) or high liquidity (spot ETFs)

This asymmetry results in a very low Sharpe ratio, meaning investors bear significant downside risk without commensurate upside compensation.

Part 2: Cracks in the Technical Foundation

The Chain Split Event of November 2025

Cardano’s long-standing moat has been its “formal verification” and “academic rigor.” The community generally believed that slow development progress was justified by unparalleled system stability. This belief was thoroughly shattered in November 2025.

A transaction containing a “format error” triggered a verification vulnerability in the codebase that had gone unnoticed since 2022. Some nodes rejected the transaction, while others attempted to include it, causing a network consensus split into two incompatible chains. Although a patch was released within 24 hours, the impact was profound:

• Limitations of Formal Verification: A piece of code generated even with developer or AI assistance could trigger a consensus split, proving that mathematical proofs cannot cover all real-world engineering boundaries.
• Network Resilience Doubts: If normal operations can cause splits, what damage could state-level attackers inflict? This shook institutional investors’ confidence in Cardano as a financial infrastructure.
• Response Failures: The team’s initial reaction was not rapid identification of the technical flaw but politicization of it as an “external attack,” contradicting the crypto ethos of “code is law.”

Hydra and Midnight: Distant Promises

Hydra is Cardano’s layer-2 scaling solution, promising to achieve theoretically millions of TPS. By the end of 2025, official reports indicate ongoing development iterations, but mainnet deployment remains extremely limited, mainly for micro-payments.

Meanwhile, competitors have delivered mature solutions: a well-known Layer 2 ecosystem supporting billions of dollars in TVL and millions of daily active users; Solana has achieved thousands of TPS through parallel execution.

Midnight is a recent new narrative— a side chain focused on privacy and regulatory compliance. Officially, it aims to be a “killer app” for the Cardano ecosystem. But deeper analysis reveals vulnerabilities:

• Privacy race faces unprecedented regulatory pressure worldwide; even the most advanced privacy solutions are not immune to sanctions.
• Midnight will issue an independent NIGHT token, which could siphon value from ADA rather than empower it.
• The project has experienced multiple delays, fitting the pattern of Cardano’s “overpromising and underdelivering.”

Part 3: Ecosystem Liquidity Rapidly Diminishing

User and Developer Outflows

On-chain activity data is a core indicator of ecosystem health. Recent figures show:

• Active Addresses: In November 2025, Cardano’s monthly active addresses dropped nearly 40%, to about 750,000. Such declines typically occur only during trust crises.
• Full-time Developers: While GitHub commits appear frequent, the meaningful metric is “full-time developers.” Data indicates developers are migrating toward more mature ecosystems with better monetization opportunities.
• Programming Language Double-Edged Sword: Haskell and its smart contract languages have high entry barriers, enhancing security but greatly limiting developer onboarding. In Web3, developers are pragmatic—they prefer platforms with mature toolchains, large user bases, and easier monetization.

DeFi Total Value Locked (TVL) Shrinks

Cardano’s TVL peaked briefly in 2024 but has been declining throughout 2025, now only a few hundred million dollars:

• Far below Ethereum and Solana (tens to hundreds of billions)
• Even lagging behind some established Layer 1 chains

More severe is the stablecoin crisis: stablecoins are the lifeblood of on-chain finance. Mainstream blockchains have tens of billions in stablecoin circulation, but native USDC/USDT on Cardano are extremely scarce. Lack of deep stablecoin liquidity means large funds cannot efficiently lend, trade, or hedge, which is the fundamental reason institutional capital cannot enter Cardano DeFi.

Part 4: Market Cap Ceiling and Liquidity Dilemma

The “Cheap” Illusion

Investors are often attracted by ADA’s low price ($0.37), mistakenly believing it has more upside than higher-priced assets. This is a classic “unit bias” psychological fallacy.

The key to assessing upside potential is market cap, not unit price. To reach a $5 target price, ADA’s market cap must hit about $180 billion—requiring surpassing major stablecoins to become the third-largest crypto asset and hundreds of billions of dollars in net capital inflow.

Where will the liquidity come from in the current market structure?

• Institutional funds mainly flow into Bitcoin and Ethereum via spot ETFs
• DeFi capital is heavily concentrated in Solana and Base ecosystems
• The liquidity needed to support a 10x market cap increase for ADA simply does not exist

Over time, large early investors and trapped DCA buyers form a massive overhead wall. Any price rebound could be overwhelmed by panic sell-offs.

Part 5: Disappearance of Institutional Confidence

Low Probability of ETF Approval

After spot ETFs for Bitcoin and Ethereum were approved, the community harbored hopes for ADA ETF approval. But regulatory logic does not support this expectation:

• Securities Classification: US regulators explicitly classify ADA as an “unregistered security” in lawsuits against multiple exchanges, fundamentally different from Bitcoin (a commodity).
• Futures Market Gap: Approval of spot ETFs presupposes the existence of liquid, regulated futures markets. ADA currently lacks this.
• Institutional Holdings: Institutional flows are concentrated in Bitcoin and Ethereum, with minimal exposure to Solana; institutions are generally cautious or avoid ADA altogether.

Hollow Corporate Announcements

The Cardano Foundation often announces collaborations with regional governments or enterprises. But these projects tend to progress slowly, lack transparent data verification, and rarely translate into on-chain transaction fee revenue. In contrast, partnerships with major exchanges, Visa, Shopify, and Layer 2 integrations with large user bases generate tangible on-chain activity.

Investors should distinguish between “corporate press releases” and “on-chain adoption.”

Part 6: Advice for DCA Investors

Perpetual Opportunity Cost

For DCA investors, the greatest pain is not price volatility but the “opportunity cost”—the potential gains missed. When funds are invested in ADA, they are effectively shorting Bitcoin and Solana. Over the past year, this “short” has resulted in approximately 130% relative underperformance compared to Bitcoin.

The Need to Change Strategy

Based on multi-dimensional analysis—technological fragility, ecosystem contraction, liquidity exhaustion, institutional avoidance—continuing to inject capital into ADA is no longer a rational investment. The sunk cost fallacy is a psychological trap; many investors keep investing because of previous losses, trying to lower their average cost. But if fundamentals continue to deteriorate, averaging down only delays recognizing losses.

Investors should immediately pause DCA, strategically rebalance their positions, and reallocate funds into assets with stronger narratives, higher on-chain activity, and deeper liquidity.

Conclusion

In crypto investing, the quality of information sources directly determines decision success. Many retail investors persist in DCA despite long-term asset underperformance, often trapped in echo chambers. Breaking this cycle begins with speaking with data, not with narratives.