Cardano Founder Proposes $100 Million Treasury Overhaul to Boost DeFi Ecosystem

Cardano's founder, Charles Hoskinson, has proposed a significant overhaul of the Cardano treasury, aiming to inject $100 million worth of ADA tokens into Bitcoin and native stablecoins. This move is designed to bolster the network's decentralized finance (DeFi) ecosystem and address the current imbalance between stablecoins and total value locked (TVL) within the Cardano network.

Hoskinson outlined his vision in a YouTube video on June 12, suggesting that $100 million of ADA be converted into Bitcoin and the native stablecoins USDM and USDA. This strategic shift is inspired by sovereign wealth funds, which diversify their holdings to generate yield and attract institutional investors. By converting a portion of the ADA treasury into yield-generating assets, Hoskinson believes this will unlock liquidity and signal confidence to institutional players, positioning Cardano as a multi-asset financial ecosystem.

The proposal comes in response to what Hoskinson describes as a "stablecoin drought" within the Cardano ecosystem. Currently, the Cardano treasury holds approximately $1.5 billion in ADA, but only about $30 million in stablecoins. This disparity is hindering the development of the DeFi ecosystem on Cardano. In contrast, Ethereum has a stablecoin-to-TVL ratio of $190 for every $100 of TVL, highlighting Cardano's lag in this area.

Hoskinson's plan aims to boost stablecoin reserves to a 33% to 40% stablecoin-to-TVL ratio. Additionally, allocating $25 million to $50 million to Bitcoin is intended to attract yield-seeking holders and potentially improve the chances of Cardano-native stablecoins being listed on tier-two and tier-three exchanges. This strategic move is expected to enhance the overall liquidity and stability of the Cardano ecosystem.

Addressing concerns from traders about the potential market impact of liquidating $100 million in ADA, Hoskinson assured that the operation would be carefully managed. He emphasized that the treasury shift would not be a reckless dump but a controlled process using time-weighted average price algorithms and over-the-counter desks. These tools are commonly used by institutional players to manage large positions without causing significant market disruption.

The success of this proposal hinges on effective timing and sentiment management. If executed well, it could transform Cardano into a leading DeFi platform. However, if not managed properly, it could backfire and negatively impact the ecosystem. Hoskinson's confidence in ADA's liquidity suggests that the market can absorb this move without significant price volatility. The outcome will depend on how well the proposal is implemented and the broader market's response to the changes.