In the past few days there has been discussion in the Cardano (ADA) community about a proposal to burn the ADA coins that is in the treasury. The amount of ADA in the treasury is around 1.5Billion ADA (which at the time of writing this post is ADA is $0.33). This post will go over whether or not burning the treasury will make ADA go up in value.
The simple answer is no, burning the 1.5Billion ADA will NOT make the price of ADA go up. In fact, the burning of any digital asset does not equal a price increase for that digital asset. This has been a false assumption in many communities for a long time.
Let me make this very clear, the ONLY thing that makes a digital asset increase in value is individuals purchasing that digital asset at a higher price compared to the last purchase price from the previous buyers.
However, burning ADA can have a positive impact on the stability of the value of ADA. This is because the idea of the treasury is to use that ADA to fund startups and projects that will support the Cardano ecosystem. However, no matter how you slice it, the coins allocated to these projects will be sold on the open market. The selling of these coins can have a negative impact on the price of ADA. Especially if the projects that are being funded do not bring in more buyers.
In conclusion, although burning the 1.5Billion ADA will not make the price go up, it may keep the value of ADA from going down due to heavy sell pressure from this treasury. I personally do not recommend burning the Cardano treasury, because a blockchain still needs resources to build an ecosystem. If the ecosystem is built properly it can outweigh the negative sell pressure from the utility that is being built. I recommend you check out this video from CryptoCrow, as he goes over the situation in more details.
Thanks for reading,
Mcdharyl Evra
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