After its turbocharged upward surge from late January through early March, could Cardano (CCC:ADA-USD) be ready to make another big leap? It’s possible. The cryptocurrency has held steady over the past few weeks. But, a recent trend could give this altcoin another near-term shot in the arm.
Like I wrote previously about ADA-USD, its true “payoff” moment may be years away. That is, don’t expect this to immediately become the next Bitcoin (CCC:BTC-USD) or Ethereum (CCC:ETH-USD). Yet, this crypto’s exposure to the much-discussed NFT (non-fungible token) trend could mean a double-digit or even triple-digit boost is just around the corner.
On the other hand, if this trend starts putting points into the price of ADA-USD, don’t consider it a “buy at any price” situation. Any sort of NFT-related boost could be temporary. If this factor starts to push this altcoin’s price dramatically higher, tread carefully. The long-term bull case remains. But, in the interim, prices could get volatile.
How the NFT Trend Could Give Cardano a Massive Boost
NFTs, or non-fungible tokens, have been catching on like wildfire in recent months. In a nutshell, NFTs are blockchain-stored digital files (think JPEGs, GIFs, even audio/video files) that can be bought and sold as assets. In other words, the digital equivalent to collectibles and fine arts. Similar to how BTC and ETH have become the digital equivalent to silver and gold.
How does this relate to Cardano? As InvestorPlace’s Brenden Rearick broke it down March 26, this crypto may soon have exposure to the NFT trend. Granted, it’s “exposure” is, as of this writing, more a possibility than a certainty. How so? This crypto’s founder is working to convince NFT platforms to switch from using Ethereum for transactions, to using this cryptocurrency.
If Cardano creator Charles Hoskinson can pull this off, it’s safe to say it would be a game-changer. Such a development would further increase the demand for it as a medium of exchange, which in turn could boost its price. The result? The potential for outsized moves.
Yet, don’t take it to mean that ADA-USD is simply a binary bet on NFTs. This factor could help bolster the bull case. But, its long standing positives (namely, its utility), continue to make up the core of it.
Existing Strengths Remain the Backbone of the Bull Case
Some may now be interested in Cardano just on its possible exposure to the NFT trend. But, its existing strengths remain the backbone of the bull case. What are its existing strengths? For starters, as InvestorPlace Market Analyst Thomas Yeung wrote March 23, its technological advantages may give established cryptocurrency networks a run for their money when it comes to transaction processing. Also, as I discussed in my prior article on this crypto, it could find demand in areas like financial services in the developing world.
As time progresses, these positives could boost demand for it as a medium of exchange. In turn, this could mean gradually higher ADA-USD prices. In short, the bull case hinges on its function.
Still a relatively small cryptocurrency, institutional investors may take their time before plowing large amounts of capital into it. But, that won’t necessarily stop it from possibly rising by double, or even triple, digits within a medium timeframe.
However, while the NFT catalyst could help further boost future gains, it may also make this a riskier crypto asset. So far, this development hasn’t done much to gin up excitement for ADA-USD. For the past month, it’s been treading water around $1.20. But, if its possible NFT catalyst comes to fruition, we could see wild price swings. If you get in early, this may be good news. But, if you try to chase it as it goes parabolic, watch out!
Bottom Line: Be Careful, as NFT Mania May Result in High Volatility
The possibility of Cardano being used as a medium of exchange for non-fungible tokens is definitely a bullish factor. Yet, if “NFT mania” starts to make an impact on prices, it could make it tough to enter a long-term position at a reasonable entry point.
Why? An NFT boost could be big. But, it could also be short-lived. It’s still early to tell whether this trend has legs. Or, if it’s going to look like utter foolishness in hindsight. As a result, we could see ADA-USD surge too quickly, before cratering as the aforementioned “hot trend” fades much sooner than anticipated.
So, what does that mean for crypto investors interested in Cardano? Consider it a buy now, as NFT hype has yet to cause a rip in prices. But, if this starts moving the needle, be careful. As this story may need many years to play out, there’s no need to rush into it at the wrong price.
On the date of publication, Thomas Niel held a long position in Bitcoin.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.