As the cryptocurrency market becomes more frothy and volatile, investors should look to Cardano (CCC:ADA-USD) as a potential safe haven.
Just how tumultuous the cryptocurrency sector is getting was underscored in the lead-up to the recent appearance of Tesla (NASDAQ:TSLA) CEO and notorious crypto bull Elon Musk on Saturday Night Live last weekend.
In the days leading up to the show, cryptocurrency Dogecoin (CCC:DOGE-USD) spiked 40% as Musk, the self-proclaimed “Dogefather,” relentlessly promoted the digital coin on social media. Immediately following Musk’s SNL appearance, Dogecoin’s value fell 30%. At the same time, the value of cryptocurrency Ethereum (CCC:ETH-USD) rose nearly 7% to $4,141.99 U.S., crossing the $4,000 mark for the very first time, according to Coin Metrics.
This volatility comes as a growing chorus of voices on Wall Street warn that a cryptocurrency bubble is forming and that speculative investors are likely to get pummeled when it inevitably bursts. Amid the rampant speculation and wild price moves, Cardano stands apart as an entirely different type of cryptocurrency: one with a purpose.
Cardano was created in 2017, which makes it one of the newer cryptocurrencies. Many of the biggest names in digital coins today were founded in 2012 and 2013. However, Cardano has an impressive pedigree, given that it was developed in Zug, Switzerland by Charles Hoskinson, who also created Ethereum, which is currently the hottest digital coin.
Ethereum and Cardano are both distinguished by their practical applications. Unlike cryptocurrencies such as Dogecoin, whose creators admit that it was created as a joke, Cardano and Ethereum are each designed to perform a specific function.
In Cardano’s case, it uses a public blockchain platform to create what are known as “smart contracts” that automatically execute the terms of a contract or a legally binding agreement.
For its part, Ethereum is used in decentralized finance to help facilitate a number of financial services without the need for intermediaries such as banks or brokerages. These practical applications set those cryptocurrencies apart from the more than 4,000 cryptos currently in existence, the vast majority of which have no real function.
Because of its functionality, Cardano is classified as a “utility token.” And it is gaining acceptance among a growing number of cryptocurrency experts and investors. Cardano is currently worth $1.90 per coin and has more than doubled in value since Feb. 15 of this year when it was worth 85 cents. In the past year, ADA-USD has risen more than 3,000%, and it is now listed as the seventh largest cryptocurrency, with a market capitalization of about $61 billion.
Some of the rise in the value of Cardano can be attributed to its being lifted by the cryptocurrency market. However, much of the coin’s appreciation is due to the fact that investors view it as the real deal in the crypto space.
Cardano even has had its open-source blockchain peer-reviewed by scientists who work in academia as well as by professional computer programmers, providing a level of rigor that is unheard of among the thousands of other cryptocurrencies, most of which have been created in people’s basements.
Access and Expansion
Despite its current status as one of the fastest growing and more legitimate cryptocurrencies, Cardano isn’t resting on its laurels. The utility token’s blockchain technology is now being used to support non-fungible tokens (NFTs), which are akin to digital art and have been selling for millions of dollars at auctions around the world this year. Cardano’s foray into NFTs could help to push the price of ADA-USD even higher in coming months.
Additionally, investors have easier access to ADA-USD now that it is available on the Coinbase (NASDAQ:COIN) cryptocurrency exchange. The biggest cryptocurrency exchange in the world, Coinbase went public in mid-April with a market valuation of $66 billion. Prior to becoming available on Coinbase, Cardano was only accessible on smaller crypto exchanges, making it hard to acquire for most retail investors. Now that Cardano is more widely available, its liquidity and demand for it should increase.
People who are determined to buy cryptocurrencies should consider taking a position in ADA-USD. A quick Internet search will enable investors to get a good understanding of Cardano.
The same cannot be said of most other cryptocurrencies, the majority of which are only riding a wave of momentum at this point. As the mania around cryptocurrencies builds, Cardano offers a rational counterpoint to the irrational speculation that is driving the crypto market. Cardano is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.