All bets are off what will happen to the cryptocurrency in the short term. But when it comes to long term games, there are several names that risk / reward is in your favor. I recently discussed ether (CCC:ETH-USD) as one such example. Another example is a name that is said to be widely used in decentralized finance (DeFi) as well. Cardano (CCC:ADA-USD).
Why do I like this “Ethereum killer” as opposed to other “killers” out there, like Polygon (CCC:MATIC-USD) and Solana (CCC:LEFT USD)? Because it is still one of the least valued altcoins. After the Alonzo upgrades, investors decided to sell the news throughout the fall. It fell from around $ 3 per token to just over $ 1.50 per share between September and November.
If that’s not bad enough, ADA-USD couldn’t avoid the December crypto sell-off. Last month it was down 19%. The result? Its valuation (based on its market cap of $ 44.85 billion) still takes into account the potential for future increased usage. However, the market continues to underestimate the prospect of it eventually becoming one of the most widely used cryptos.
After saying all of this, I admit that this cheap altcoin could get cheaper in the near future. We may see even bigger drops in the course of 2022. However, if you are thinking of crypto games long term and can endure the volatility, then you should consider adding it to your portfolio.
The bull case for Cardano
ADA-USD is still a buy, even though it currently trades for around $ 1.32 per token. First of all, while investors are more pessimistic than optimistic right now, little has changed in the story behind it.
As I discussed in my last article on Cardano, the developers continue to take the right steps. This is especially true for expanding or upgrading the token and its ecosystem. Last year, Cardano led cryptos in developer activity, according to a report by analyst firm Santiment.
Santiment stated that that fact didn’t mean much to his short-term performance. Even so, there can be something to consider when it comes to the long-term potential of a particular cryptocurrency. Additionally, as I mentioned in previous coverage of this altcoin, there is an important catalyst for this this year. This is the launch of its Hydra scaling solution.
Once it’s online, Hydra could help beat competitors like Ethereum and Solana in terms of transaction speeds. According to reports, Hydra could give Cardano’s network the ability to process 1 million transactions per second. That said, before you get into this there is one thing you should keep in mind. This token, which has been trading wildly for the past six months, could continue to do so in the months to come.
You cannot escape high volatility
There is still a lot of uncertainty lurking in both stocks and crypto. With this, you might be looking for crypto games with high upside potential but low volatility. Unfortunately, that will be a challenge. Even the established names in this asset class, like Bitcoin (CCC:BTC-USD) wild price movements are not unknown.
High volatility is likely to be on the menu for Cardano in 2022, although support was found between $ 1.20 and $ 1.50 per token last month. We could see another crypto sell-off in the coming months. For example, the US Federal Reserve will publish more information on its interest rate hike plans. News of a faster move to higher rates could spur another exit from risky assets like crypto.
This could cause ADA-USD to drop back below $ 1 per share. It has not been traded that low in almost a year. However, the high volatility and the potential for further weaknesses could be an opportunity for long-term investors. By buying it now and buying more if it leads to another decline, you could build a position that, in hindsight, could be a more than cheap entry point.
In the years to come, when upgrades like Hydra – as well as other upgrades that enhance its DeFi capability – come online, it still has a chance of making its way into the $ 100 billion crypto club (currently only occupied by Bitcoin and Ethereum ) To find. It is worth comparing the chances of this development with the risk of sustained price losses.
Conclusion on ADA-USD
After a rocky December, the months ahead could prove to be difficult for crypto investors. However, if you believe this asset class will survive a “return to normal” in Fed monetary policy, now may be the time to add positions in the names with the best long-term potential.
Think of Cardano as a long term game to buy as it is still beaten. It is making great strides in improving its functionality. The news of high developer activity is also an encouraging sign. When you add it all up, the prospects are still good for this altcoin.
At the time of publication, Thomas Niel held LONG positions in Bitcoin and Ethereum. He did not hold any of the other securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing individual stock analyzes for web-based publications since 2016.