Cryptocurrency prices saw a brief correction last weekend. This included a considerable dip in the price of Cardano (CCC:ADA-USD) as well. But, as seen from its partial recovery the following day, this sell-off, triggered by rumors the U.S. Treasury plans to crack down on the use of Bitcoin (CCC:BTC-USD) in money laundering, could be short-lived.
In short, this may not be the start of the end for the runaway bull market in cryptos. Instead, major names like Bitcoin, along with emerging cryptos like ADA, may be set to continue rising to higher prices. Yet, betting on a quick recovery from last weekend’s “flash crash” isn’t the only reason to buy Cardano at today’s prices.
A crypto with high functionality, Cardano may be a cut above the other smaller cryptos that have received attention in recent weeks. Now, the risk of a further “crypto crash” remains on the table. It’s too early to tell whether this is a short-lived bubble. Or, the start of a full-on paradigm shift.
But, even with its risks, the potential for it to rise over the long-term makes it a cautious buy at today’s prices.
Recent Sell-Off Doesn’t Change the Game for Cardano
The April 18 “flash crash” may be seen by some as a possible start to a large-scale washout in the crypto space. But, given that earlier-mentioned recovery in crypto prices immediately after, in hindsight this volatility may be only a short-term blip.
Still, I will stress again: don’t make a purchase simply as a “buy the dip” play. More importantly, this temporary pullback has done little to change the strong bull case for Cardano based on its fundamentals. As I broke it down back in March, the key to this altcoin is its high utility. That is, the technology behind it may give it greater function than incumbent cryptocurrencies.
This bodes well for its eventual widespread use. Admittedly, this alone doesn’t guarantee it’ll move up substantially from its current rank among cryptos by market capitalization. For that, it’ll need massive inflows from institutional investors. And, still in its early stages, it may take years before that happens.
Even so, compared to other altcoins currently popular with investors, there is more than enough substance backing it up. That may not mean much in the near-term. But, as a long-term play, that’s going to make a difference.
ADA-USD vs. Dogecoin
An interesting take away from the recent correction has been the relative resiliency of Dogecoin (CCC:DOGE-USD). Bears (such as myself) may have written it off a bit too early, as seen from its stunning rise since April 12. But, not only has it continued to rally, it also quickly bounced back from its April 18 losses.
But, when it comes to betting on the next major crypto, which one sounds like the stronger contender? The one that has substantial real world applications (such as financial services in emerging economies)? Or, the one that started off a meme but, thanks largely to the hyping by Elon Musk, has soared to become the fifth most-valuable crypto, entirely on investors buying it out of FOMO?
That’s not to say we’ve seen a top in Dogecoin. The hype around it could continue, until the pool of potential speculative buyers gets tapped out. But then, given it stands little chances of obtaining “smart money” inflows in the near-term, expect it to drop considerably, as the bull case behind has been little but “greater fool theory” in action.
In short, if you’re looking for a crypto that could someday break the $100 billion, or even $1 trillion market cap level, go with names like Cardano. As it gains critical mass, and once big-ticket investors start allocating funds to it, it has greater long-term potential than Dogecoin.
Still Risky, Approach Cautiously
Again, it may not be smooth sailing from here with ADA-USD. Its long-term prospects are more than solid. But, given that the crypto market could see additional volatility, there’s no guarantee this asset class won’t pull back in a big way in the coming days, weeks, or months.
Yet, if you feel you missed the boat on BTC, and are looking to “get in early” on the next big cryptocurrency, it’s best to stick with names like this (with strong fundamentals). Rather than ones running on meme energy alone.
Bottom line: it’s still risky, so approach cautiously. But, even after the “flash crash,” consider Cardano a buy at today’s prices.
On the date of publication, Thomas Niel held a long position in Bitcoin. He did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.