Cardano’s Privacy-Focused Sidechain Emerges as a Bright Spot Amid Network Concerns

As 2025 draws to a close, the Cardano ecosystem presents a contrasting picture. While its native ADA token faces technical headwinds, a new development within its network is capturing significant market attention and could potentially redefine the project's trajectory.

The standout narrative centers on Midnight, Cardano's privacy-oriented sidechain. On December 29, its associated token, NIGHT, ranked among the most-searched cryptocurrency assets. Trading between $0.09 and $0.095, the token posted intraday gains reaching 11% on certain exchanges. With an approximate market capitalization of $1.5 billion, Midnight is poised to enter the top 40 ranking of digital currencies.

The sidechain's progress has drawn notable commentary. Cardano founder Charles Hoskinson has expressed a vision extending beyond short-term interest, suggesting Midnight could foster a partner-chain "ecosystem" valued at $10 billion. In a rare display of cross-project acknowledgment, Ripple's Chief Technology Officer David Schwartz also offered positive remarks on the development.

ADA Confronts Technical and Usage Challenges

This sidechain success starkly contrasts with the pressure on Cardano's primary network. On December 29, ADA traded around $0.35, positioned below key technical indicators. The 20-day moving average at $0.38 and the 50-day average at $0.44 remain resistance levels, with the $0.33 mark viewed as critical support. A breach below this level could accelerate the downward trend.

Should investors sell immediately? Or is it worth buying Cardano?

Despite the price weakness, some accumulation was evident. Net inflows into ADA spot positions totaled roughly $3.1 million on Monday, indicating certain investors are viewing current levels as an entry point. However, speculative interest appears to be waning; open interest in ADA derivatives declined by 1.64% to approximately $712 million.

The broader debate focuses on network utility. Mike Novogratz, CEO of Galaxy Digital, issued a warning on Monday, cautioning that legacy blockchains like Cardano risk becoming "zombie assets" if they cannot demonstrate measurable usage beyond their core communities. Data from CryptoQuant appears to underscore this concern, showing Cardano currently processes around 19,000 active addresses daily. For context, Solana handles millions of daily active users while commanding a market cap exceeding $72 billion. This valuation-to-activity disparity fuels skepticism among institutional investors.

The Path Forward for Cardano

The project stands at a pivotal juncture. From a technical perspective, reclaiming the $0.38 level is necessary to alleviate selling pressure. Fundamentally, the ecosystem's future may hinge on whether Midnight's promising start can catalyze greater adoption on the mainnet itself.

While applications for a Grayscale ADA ETF remain pending, the central question for 2026 is whether Cardano can successfully transition from a staking platform to a broadly utilized blockchain. The performance of the Midnight sidechain may well provide the initial answer.