Cardano Could Soon Cool, But the Long-Term Bull Case Remains

Following its pullback during last month’s crypto “flash crash,” Cardano (CCC:ADA-USD) has bounced back in a big way. This is in line with the recent performance of other altcoins, or cryptocurrencies outside of Bitcoin (CCC:BTC-USD).

A concept coin for Cardano (ADA).
Source: Shutterstock

Instead of moving in tandem with it, altcoins like Cardano, Ethereum (CCC:ETH-USD) and Dogecoin (CCC:DOGE-USD) have been outperforming BTC as of late. Fearful of missing out on the fortunes being created in a blink of an eye with these alternative cryptos, it’s understandable how this trend has developed.

Can it continue? We may see a brief correction, given how things have become overheated in recent trading days. However, it’s too early to tell whether this is a short-lived trend or if it can carry on for several months longer.

Yet, while the near-term is a bit uncertain, the long-term bull case for Cardano stands. Here’s why.

Cardano and the Mad Dash into Altcoins

Up until recently, altcoins traded in the same direction as the crypto-market benchmark, Bitcoin. They may have seen more outsized moves relative to it. But, if it went up, other coins went up. And, if it went down, other coins went down.

Since the flash crash, though, this has shifted. True, the largest crypto by market capitalization has partially recovered from its recent lows. However, Bitcoin has failed to reach its high-water mark above $64,000, which was set on Apr. 14. Meanwhile, names like Cardano have not only bounced back but even hit new highs. We’ve seen it play out with Ethereum, too, and even to the extreme with everybody’s favorite “meme coin,” DOGE.

Again, this speculative mania could easily fizzle out. Or, it could carry on for much longer than expected. With the media flooded with news of altcoins leaping higher — especially Dogecoin — speculators are trying to grab their piece of the pie. But, similar to the short-lived bubble in “meme stocks” back in February, this may result in a big correction following the epic rallies.

As such, chasing Cardano today may not be a profitable move. However, speculating on its near-term price movements is just one way to play it. A less chancy way may be to treat it as a long-term bet on mass adoption for blockchain transactions.

ADA-USD and Its Utility Catalyst

Speculation is solely in the driver’s seat when it comes to names like Dogecoin. However, Cardano has a secondary factor that’s helping it out in the short-term. And better yet, this secondary factor may be what gives it more runway in the coming years.

It’s similar to the situation playing out with Ethereum. Interest on that coin, — which, starting in late April, went on a tear due to speculation as well as increased appreciation of its utility — may be cooling off now. But, as its use in decentralized finance (DeFi) applications continues to grow, its price could continue to rise as well.

Now, this is not an exact comparison. I won’t go as far as to say that Cardano is the next ETH. Things are still in the early stages with this altcoin. However, with upcoming protocol upgrades, expect it to become more widely used in DeFi. Among other things, these upgrades will enable smart contracts on the Cardano blockchain.

And that’s only the start. The coin’s founder, Charles Hoskinson, has “laid out the roadmap for his blockchain’s development until 2025″ according to Yahoo! Finance. It’s going to take time. But — as it plays out and this crypto becomes akin to Ethereum in widespread DeFi and blockchain usage — patience may pay off.

Bottom Line: Focus on the Long-Term with Cardano

The continued enhancements to this coin’s blockchain will help proliferate its usage. In turn, this will help put more points into the price of ADA-USD. However, expect this to play out over the course of years. This notion may turn off investors looking for a “fast money” opportunity. For that type of trade, you may be better off chasing whatever flavor-of-the-month altcoin is making new highs on speculation.

If you want a long-term crypto play, though — something with substance and a compelling bull case — consider Cardano. You may want to wait for things to cool off further before buying today. But, consider it a solid long-term opportunity on any major pullback.

On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.


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