As certain Cardano supporters keep advocating for token burns, we examined the potential impact on ADA's value if the team were to eliminate 50% of its overall supply.
Token destruction has emerged as a common approach to boost the value and rarity of digital assets. This method entails eliminating a part of the token supply by transferring it to an inactive wallet, which may lead to increased prices over time.
Projects such as Shiba Inu havereliedThis approach serves as a method to boost the value of the SHIB token. Interestingly, SHIB experienced a major surge several months following Ethereum co-founder Vitalik Buterin's burn of 41% of its 1 quadrillion supply. This event highlighted the significant effect that token burns can have on increasing a token's value.
In the meantime, Cardanodoes not support burns and lacks a specific burn address. Some members of the community have suggested burning a part of the supply, especially the portion held within the ecosystem's treasury.
Demand for Cardano Burns
Last year, notable individual Big Peyproposedthat the community had the option to burn approximately 1.5 billion ADA from the treasury. Interestingly, some users even pushed for additional burns in an effort to increase the price of ADA.
Considering this, The Crypto Basic estimated ADA's possible price if half of its total supply was moved to an unaccessible wallet. This prediction assumes that ADA's overall market value stays the same—a hypothetical situation—while its supply is cut in half.
For context, ADAPossesses a stock of 45 billion tokens, with 35.83 billion currently in use. Therefore, cutting the overall supply in half would bring it down to 22.5 billion. At the time of publication, ADA was being traded at $0.6713, having a market value of $24.05 billion. This cost represents the present quantity of ADA tokens in circulation.
ADA Price if 50% of the Supply Is Removed
In a hypothetical situation where ADA's market capitalization stays the same but half of its total supply is destroyed — reducing it to 22.5 billion tokens — the expected price per ADA would be $1.06.
In the same way, if half of the available supply (which is currently 35.83 billion ADA) were removed, bringing it down to 17.91 billion tokens, the price of ADA would be $1.34, provided the market value remains the same.
Both the $1.06 and $1.34 projections remain under ADA's former all-time high of $3.10, which was set on September 2, 2021. Cardano temporarily surpassed the $1 mark in August amid a general market upswing. Nevertheless, it is now trading beneath that threshold, with one token valued at $0.6713.
Nevertheless, various analysts, including MMBTrader,believeThat Cardano may regain $1 in the near future. Additionally, well-known analyst BullStarpredictedADA's possible rise to $1.30.
Point to Note
Nevertheless, destroying a large part of the tokens — specifically, 50% of ADA's total supply — would also eliminate the associated market value of those tokens. Consequently, ADA's price would technically stay the same unless demand rises while the supply falls.
A prominent example is Stellar (XLM), which eliminated 50% of its total supply in 2019 but still struggles to perform well because of insufficient demand. This shows that token burns do not ensure an increase in price, but they can lead to more significant future increases if demand improves.
Additionally, it's not entirely practical for Cardano to burn half of its supply, since the majority of ADA tokens are held by individual users. Accomplishing such a significant burn would necessitate holders to destroy their own assets, which is very unlikely.