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On July 5th, Input Output Hong Kong, the organization behind the Cardano (CCC:ADA-USD) Blockchain, announced two partnerships of interest to ADA owners.
The first sees the Nexo Exchange, which lists Cardano’s native cryptocurrency.
This means that owners of ADA can buy and sell through the exchange, earn interest on their existing coins, and borrow against the coins in US dollars or one of the other 40+ fiat currencies.
The second partnership is a collaboration with the decentrally funded (DeFi) liquidity aggregator Orion Protocol. As far as I can tell, Orion allows you to get the best price on your crypto purchases and sales on all global crypto exchanges.
I go a long way from the two partnerships to argue that the latter is more important to Cardano than the former.
Cardano and Celsius network
Let’s say I own 30,000 ADA. Assuming a price of $ 1.42 (trading just below that this morning) that’s about $ 42,600.
The first partnership means that I can take my ADA and transfer it to my Nexo wallet. I would then earn up to 12% on the value of my assets.
At the same time, I could use the assets as collateral to borrow US or Canadian dollars or any of the other fiat currencies available.
So based on the $ 42,600 in ADA, I could borrow $ 18,073 at an annual percentage rate (APR) of only 6.95%. Let’s say my line of credit doubles to $ 85,200, my line of credit would increase to just over $ 36,000.
Just to keep my crypto in a Nexo wallet.
I could use Nexo. Or I could go with the undisputed crypto exchange champion and put my $ 42,600 ADA in a Celsius wallet.
The only problem is that ADA is not yet available as a collateral for Celsius. Additionally, I was able to borrow only $ 14,058 for the same interest rate of 6.95%, based on a 33% Lending Ratio.
The addition of ADA to Nexo is therefore a small business for Cardano lovers.
What about the Orion Protocol?
Imagine you had 10 investment accounts with 10 different stock brokers. Just everyone had their own independent valuation of stocks.
You could buy 10 shares of Stock A in all 10 companies, and no two listed prices would be the same.
That is the problem that crypto buyers have. It’s called kimchi premium.
The problem first became known in late 2017 when the price of Bitcoin (CCC:BTC-USD) in South Korea was 30% higher than on crypto exchanges in other countries, including the US. This opened the door to arbitrage games from dealers.
“The key to Orion’s value is its built-in liquidity aggregator, which automatically gives its users access to multiple exchanges to get the best spot price for each supported cryptocurrency, which embodies the best of both centralized and decentralized exchanges,” says Orion Whitepaper of the protocol.
So in theory, I could use Orion Protocol’s price aggregator to buy some ADA and then transfer it to my Nexo wallet to earn interest or borrow money for it.
From where I sit, it’s a lot like the chicken or egg argument. I want to own Cardano, but I don’t want to pay an outrageous price based on an exchange’s above-average purchase price.
The Orion Protocol keeps this from happening to me. The same cannot be said when buying through Nexo or Celsius.
The bottom line
Unfortunately, although the two partnerships are important steps in Cardano’s development, they are by no means decisive for the future.
Cardano’s success is all about smart contracts and benefits. If there is any benefit, the value of ADA increases. If it doesn’t, ADA’s price will go down.
My view of the latest developments at Cardano is cautious optimism. None of the partnerships are groundbreaking in my opinion. However, they will be useful as case studies for future Cardano applications.
I continue to believe that ADA is the cryptocurrency that is not Bitcoin or Ethereum (CCC:ETH-USD) with the most tangible opportunity. The partnerships should be good to convince others of this.
At the time of this writing, Will Ashworth held positions (neither directly nor indirectly) in the securities discussed in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Will Ashworth has been a full-time investing writer since 2008. Publications he has appeared in include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in the United States and Canada. He is particularly fond of creating sample portfolios that will stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing, Will Ashworth had no position in any of the above securities.
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