Cardano Could Record Supply Shock As Investors Retain 7B ADA for Over 5 Years

Pieter Nierop, a Cardano proponent affiliated with the Cardano Fans staking pool, asserted that Cardano could see a huge supply shock amid a disclosure that investors have held 7 billion ADA for over five years.

For the uninitiated, a supply shock is a sudden reduction in the available supply of a crypto asset, often due to factors like halving events (as in the case of Bitcoin and Litecoin) or increased interest from retail or institutional investors leading to massive purchases.

Market participants consider this phenomenon bullish because reduced supply, combined with sustained or growing demand, can drive up the cryptocurrency’s price due to scarcity, potentially benefiting existing investors.

7 Billion ADA Held for Over 5 Years

Nierop believes Cardano could experience this event due to the percentage of ADA supply that investors have persistently held for a considerably long time.

Recall that The Crypto Basic revealed last week that 23% of Cardano investors have held their assets, amounting to 7 billion ADA, for over five years.

The sheer worth of these 7 billion tokens, currently valued at $3,793,655,976 ($3.79 billion), triggers intrigue among market watchers.

While a few individuals have argued that some of these tokens could be lost due to misplaced private keys or represent part of the Cardano Foundation’s holdings, the metric signals confidence in the asset.

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Data from IntoTheBlock further confirms that 11.96% of holders, currently in possession of 3.66 billion ADA, have not sold their tokens for three to five years.

Meanwhile, 6.75% of these investors have held onto their assets for two to three years. This category of holders possess 2.07 billion ADA.

Cardano Could Experience a Supply Shock

Nierop’s latest disclosure called attention to the substantial amount of ADA tokens held for an extended period by investors.

He emphasized that these assets do not represent institutional holdings yet, as they might be having a hard time procuring these assets due to the HODL culture of retail investors.

The Cardano enthusiast stressed that this is a bullish reality for the asset, as its available supply continues to decrease, leaving emerging institutional investors with no option but to pay more to procure the limited available supply. 

Notably, ADA has a circulating supply of 35.4 billion tokens. However, with most of these tokens religiously held by investors, and the rest of the supply gradually getting locked in smart contracts and staking protocols, Nierop believes the cryptocurrency will experience a supply shock in the future.

Such an event would likely bolster ADA’s bullish momentum, as the asset battles to reclaim the $0.55 level in the short term.

Currently trading for $0.5385, ADA could set the stage for a rally to $0.68 if it can break above the resistance range of $0.54 to $0.56, according to market analyst Ali Martinez.