Cardano Plans 5-10% ADA Treasury Conversion to Bitcoin and Stablecoins for DeFi Boost

Cardano’s leadership has proposed a significant financial strategy to bolster its presence in the decentralized finance (DeFi) space. The network plans to convert 5–10% of its $1.2 billion ADA treasury into Bitcoin and stablecoins. This move is aimed at enhancing treasury returns and strengthening Cardano’s competitiveness in the broader crypto market.

Cardano’s strategy involves reallocating a portion of its native token holdings into harder assets like Bitcoin and tokenized dollars. This approach is similar to that of sovereign wealth funds, which seek stable returns by diversifying their exposure. The proposal reflects a desire to anchor Cardano within the growing DeFi ecosystem. The bonds of stablecoins such as USDT and USDC include exposure to U.S. Treasuries, which are high-yield assets backed by government bonds. In contrast, Bitcoin is a decentralized store of value with a fixed supply and demand. By combining the two, Cardano’s treasury strategy can protect against inflation and earn returns.

The suggested conversion would amount to up to 140 million ADA, which would be operated via OTC desks with a TWAP strategy to reduce price shock. This plan is designed to spread out the purchases to prevent slippage and maintain market sentiment. Cardano aims to preserve ADA’s average price while shifting its asset base.

Cardano’s decision is influenced by macroeconomic trends, particularly the ongoing erosion of USD purchasing power and rising government debt. As U.S. spending increases, assets like Bitcoin gain value as hedges against fiat depreciation. Meanwhile, stablecoins are becoming tools of financial hegemony due to their deep ties with U.S. Treasuries. Tether and Circle have emerged as major buyers of U.S. debt, indirectly supporting interest rate stability. Tether’s Q1 profit exceeded $1 billion, highlighting the profitability of stablecoin operations in current market conditions. Cardano’s exposure to these instruments could generate consistent returns in a low-risk manner.

This financial positioning may also help mitigate ADA’s inflationary pressure. With a 2% annual inflation rate and 35.36 billion tokens in circulation, managing demand becomes critical. Channeling returns into future ADA repurchases may support price stability and incentivize long-term holding.

Despite its strategic moves, Cardano still lags behind major competitors in blockchain performance and DeFi integration. Currently ranked 34th in transactions per second, Cardano processes just 0.26 tx/s despite a theoretical capacity of 18.02. Finality times of two minutes further reduce its competitiveness against faster chains like Solana. Cardano’s top DeFi dApp, DexHunter, leads in wallet activity, while Lenfi holds the most total value at $11.62 million. In contrast, Solana and Ethereum dominate with billions in total value locked across hundreds of dApps. Cardano’s DeFi ecosystem remains underdeveloped, despite being older than some competitors.

With only $31.44 million in stablecoins and $267.5 million in total DeFi value, Cardano needs a liquidity catalyst. A treasury-funded stablecoin inflow could reduce slippage, improve yields, and attract users to lending platforms. Increased activity may boost Cardano’s network value and developer interest over time.

Cardano’s plan to convert part of its ADA treasury into Bitcoin and stablecoins marks a significant strategic move. It aims to fix treasury returns, increase the cost of ADA with subsequent buybacks, and make DeFi more active. Despite technical limitations and lagging performance, this approach could help Cardano attract more liquidity and utility, pushing it closer to becoming a top DeFi blockchain.