Is Cardano’s Plan to Convert Part of ADA Treasury into Bitcoin a Wise Move?

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In June 2025, Charles Hoskinson, founder of Cardano (ADA) and former co-founder of Ethereum (ETH), proposed a bold strategic shift: converting 5–10% of the ADA treasury—valued at approximately $1.2 billion—into Bitcoin (BTC) and stablecoins. The goal? To establish a sovereign wealth fund that could revitalize Cardano’s presence in decentralized finance (DeFi) amid an increasingly competitive blockchain landscape.

This move has sparked intense debate across the crypto community. Is it a visionary step toward long-term sustainability, or a risky departure from native ecosystem development? Let’s explore the implications, opportunities, and challenges behind this proposal.

Understanding the Sovereign Wealth Fund Concept

A sovereign wealth fund (SWF) is traditionally a state-owned investment vehicle funded by surplus government revenues, often from natural resources or trade. A prime example is Norway’s Government Pension Fund Global (GPFG), which started with oil revenues but now holds diversified assets—including equities, bonds, real estate, and renewable infrastructure—totaling nearly $2 trillion as of 2024.

Hoskinson’s idea mirrors this model: instead of relying solely on ADA inflation and staking rewards, Cardano could diversify its treasury into harder, more liquid assets like Bitcoin and dollar-backed stablecoins. These assets would generate yield and appreciation over time, which could then be reinvested into ADA—effectively creating a self-reinforcing cycle of value accrual.

👉 Discover how leading blockchains are redefining treasury strategies in 2025.

Why Bitcoin and Stablecoins?

Two core assets under consideration—Bitcoin and stablecoins—offer distinct advantages:

By allocating part of its treasury to these assets, Cardano would not only hedge against fiat inflation but also gain exposure to real-world yield—a rare advantage in the crypto space.

Evaluating the Impact on ADA’s Market Performance

Cardano currently has 35.36 billion ADA in circulation out of a max supply of 45 billion, with an annual inflation rate of around 2%. The treasury holds nearly 31% of total ADA, funded by staking rewards (20% of which go to the treasury). Converting 5–10% of this treasury (~$1.2 billion) into BTC and stablecoins raises concerns about potential selling pressure.

However, Hoskinson proposes using over-the-counter (OTC) desks and a time-weighted average price (TWAP) strategy to minimize market disruption. This method spreads purchases over time, avoiding sudden price swings—an approach famously used by Michael Saylor’s Strategy (formerly MicroStrategy) during its large-scale Bitcoin acquisitions.

If executed carefully, this strategy could prevent panic selling while allowing Cardano to accumulate high-conviction assets quietly. Long-term, profits from BTC appreciation and stablecoin yields could be used to repurchase ADA, effectively creating a deflationary pressure mechanism similar to stock buybacks.

This dual benefit—capital preservation through BTC and yield generation via stablecoins—could enhance investor confidence and support ADA’s price stability.

Strengthening Cardano’s DeFi Ecosystem

Despite launching in 2017, Cardano remains behind leaders like Ethereum and Solana in DeFi adoption. As of mid-2025:

These numbers highlight a critical gap. With only 0.26 real-time transactions per second (TPS) compared to Solana’s 12.8 seconds finality and theoretical throughput of thousands of TPS, Cardano lags in scalability—especially as it’s still in the Basho phase, aiming to implement Hydra for layer-2 scaling.

Moreover, fragmented liquidity and low stablecoin availability make lending, borrowing, and yield farming riskier on Cardano-based DEXes due to slippage and impermanent loss.

Introducing $100 million+ in stablecoin liquidity could dramatically improve this landscape:

Already, DexHunter leads in user activity as a DEX aggregator, while Lenfi dominates in value locked at $11.62 million. But these figures remain marginal compared to top-tier ecosystems.

👉 See how top blockchains are attracting stablecoin liquidity in 2025.

Addressing Common Questions

Why convert ADA to Bitcoin instead of investing directly in dApps?

While direct funding of dApps supports ecosystem growth, holding Bitcoin provides capital preservation and optionality. BTC acts as a macro hedge against systemic risks, allowing future reinvestment when conditions are favorable.

Won’t selling ADA devalue the token?

Potential downward pressure exists, but OTC sales and TWAP execution minimize immediate impact. Over time, buybacks funded by BTC/stablecoin gains can offset initial dilution.

Can stablecoins really help Cardano compete with Ethereum or Solana?

Yes—stablecoins reduce friction in DeFi. They enable predictable returns, lower slippage, and attract users who avoid volatile memecoins. A robust stablecoin presence is foundational for mature DeFi ecosystems.

Is this just copying MicroStrategy’s strategy?

While inspired by Michael Saylor’s BTC treasury model, Cardano’s approach is broader—incorporating both BTC and yield-generating stablecoins tailored for active DeFi integration.

What happens if Bitcoin or stablecoins fail?

Regulatory scrutiny remains a risk, especially for Tether. However, USDC’s transparency and backing by BlackRock-managed reserves add credibility. Diversification across both assets mitigates single-point failure risks.

When will this plan be implemented?

No official timeline has been announced. The proposal is under community discussion, reflecting Cardano’s eventual shift toward decentralized governance in the Voltaire era.

The Strategic Bottom Line

Ethereum recently borrowed $2 million in stablecoins from Aave using wrapped ETH as collateral—proving that mature DeFi ecosystems allow projects to access liquidity without selling their native assets. Cardano isn’t there yet.

But Hoskinson’s proposal marks a pivotal step toward financial maturity. By treating the treasury like a sovereign fund, Cardano can:

It may seem counterintuitive to favor BTC over ADA—but they serve different roles. Bitcoin is a store of value; ADA is a utility and governance token. Holding both strengthens the ecosystem holistically.

With clear regulatory signals supporting stablecoins under the current U.S. administration—and growing demand for non-CBDC digital dollars—now is the time for Cardano to act.

👉 Learn how blockchain treasuries are evolving in the new financial era.

Core Keywords

The path forward isn’t about choosing between native development and external investments—it’s about leveraging both. If executed wisely, this plan could position Cardano not just as a smart contract platform, but as a financially resilient blockchain nation.