Cardano Plans $100 Million ADA Conversion to Boost DeFi Liquidity

Cardano co-founder Charles Hoskinson has proposed a strategic move to enhance the liquidity and growth of the Cardano decentralized finance (DeFi) ecosystem. The proposal involves converting $100 million worth of ADA from the project’s treasury into a blend of stablecoins and Bitcoin. This initiative aims to address the current low stablecoin-to-DeFi ratio on the Cardano network, which stands at under 10% with approximately $33 million in stablecoins and $330 million in total value locked (TVL).

Hoskinson, in a recent YouTube livestream, highlighted the need for diversification in the treasury holdings to better align with competitors like Ethereum and Solana, which have stablecoin-to-DeFi ratios of 190% and 110%, respectively. He suggested converting the $100 million ADA into a mix of stablecoins such as USDM, USDA, and ADA-backed stablecoin synthetics like IUSD, as well as Bitcoin. The goal is to achieve a stablecoin issuance to TVL ratio of at least 33% to 40% on the network.

Hoskinson believes that Cardano’s $1.2 billion treasury, or 1.7 billion ADA, can safely allocate 5–10% into stablecoins and Bitcoin without significantly impacting the overall treasury. He emphasized that the Cardano market is deep enough to absorb the sale of $100 million in ADA over a period of 30 to 90 days using mechanisms such as Time-Weighted Average Prices (TWAPs) and Over-the-Counter (OTC) trades. This gradual approach is designed to minimize market disruption and ensure a smooth transition.

The proposal also includes plans for yield-generating instruments and potential governance structures, such as an elected board to manage the sovereign wealth fund. The funds generated from this conversion would be used to support the growth of the DeFi ecosystem on Cardano, with a particular focus on increasing liquidity and TVL. This move is seen as a strategic step to strengthen the Cardano network's position in the DeFi space and to foster the growth of its stablecoin ecosystem.

By increasing liquidity and TVL, Cardano aims to attract more users and developers to its platform, ultimately driving the growth of its DeFi ecosystem. This initiative underscores Cardano's commitment to innovation and its efforts to remain competitive in the rapidly evolving blockchain landscape. The conversion of $100 million in ADA into stablecoins and Bitcoin is part of a broader strategy to enhance the utility and value of the Cardano network, positioning it as a leading player in the DeFi space.