The concept of asset classes like precious metals is pivotal to understanding to the popularity of cryptocurrencies, such as one called Cardano (CCC:ADA-USD).
It’s been more 13 years since the 2008 great financial debacle. However the Federal Reserve cannot snap out triage mode. Central banks continue to find reasons for giving the world financial morphine. They’ve found headline-cover for it and the latest one was a doozy. Stopping the entire world’s business operations for month was definitely a worthy crisis.
Cryptocurrency concepts are now hotter than ever. It’s a puzzle to old experts even Charlie Munger and Warren Buffett. But they are flat out wrong.
Crypto is often vilified for facilitating crime, however I bet that cash is the biggest culprit there.
As an asset class, cryptocurrencies have been head and shoulders above all others. Nothing even comes close in the past decade. Comparing it to the gold rush doesn’t even do it justice enough. Imagine a gold rush where miners are also picking up other rocks that spike in value along the way.
Cardano is a cryptocurrency trying to make its way up the chain. It has roots in other crypto coins from the founders of Ethereum (CCC:ETH-USD). There are nuances to it and its uses, but for capital appreciation, the details aren’t that necessary. Its mechanics and the applications are exciting but too complicated to discuss here.
iPhone users love the phone, they don’t need to know how it works to buy Apple (NASDAQ:AAPL) shares.
Cardano Value Is Growing Because People Believe It Will
Making the argument for the opportunity that lies within investing in Cardano is easy. It is worth the risk because of the veracity with which markets are buying e-coins. Investors are flocking to them hoping to strike riches. They do have many examples of that happening right now.
Bitcoin (CCC:BTC-USD) is the biggest but Ethereum is gaining. All other newcomers are instant hopefuls, including Cardano.
From a capital-appreciation perspective, they all have merit. The driving force behind their popularity is largely human emotions. That is impossible to forecast, but chasing riches is age-old and it’s unfolding here.
When it comes to traditional investing, I typically shy away from chasing memes. But investing in hopeful cryptocurrencies like Cardano makes for a compelling lottery-ticket style investment.
It’s hard for me to even use the word lottery and investment in the same sentence, but it’s realistic. To put odds next to it would be complete speculation.
Skepticism against governments is at extreme highs, making crypto more popular. Major central banks are in a race to devalue their currencies. The goal is to inflate their economies out of the pandemic hole.
Central Bank Actions Makes It Necessary
Last year, the governments panicked and shut down the whole world for months. They scheduled the depression scenario as they would a dentist appointment. The goal was noble to save lives, but the price to get out of it has gone out of control.
The U.S. dollar is the currency of the world. And it cannot find a bottom. Buying assets like cryptocurrency shields wealth from government actions. By that I don’t mean hide money from the government. Rather, it’s owning something that isn’t affected by central banks actions.
There is nothing that the Fed, for example, can do to affect Bitcoin prices. Authorities would have to ban cryptocurrencies – and that’s highly unlikely. Cardano is carving its piece of that coin-rush pie. There is no reason to doubt it at this level. The rallies have been violent and that creates a lot of hope. Investors – especially new ones – see a 240% rally unfold in mere weeks and they think it’s how things go.
Case in point: On April 13, Cardano fell 41% in nine days. Then it rallied 50% in six days thereafter.
Bring your helmets and your Dramamine, then owning this e-coin could be fun. I’ve read opinions that are too bifurcated. There are haters and extreme lovers of it. Both are wrong because there is valid merit to cryptocurrencies. And there are also limits to their values. Current price action may not reflect it but in the end they are not all a Bitcoin story.
If You Believe in Gold and Cash You Are Already There
Gold, fiat cash, Bitcoin and Cardano have value because people say so. There is no real reason why a yellow rock (gold) is worth more than a white one next to it. Gold serves no real purpose but people love it. It is also hard to find, therefore, it has value.
Haters of cryptocurrency cannot believe the fact that there are this many people chasing them. Cardano is part of a change of time where we are expanding asset classes. Those who cannot adapt will be left in the dust. The easiest thing to do for haters is to just ignore it.
Not owning cryptocurrency will not cause you incremental harm as an investor. It just leaves you in harm’s way of what the central banks are doing to your money. I realize that we need to spend a lot to dig ourselves out of an economic hole. I fear that we’ve gone too far and that repercussions will last decades. My son is 19 now, and he’s going to have to deal with this mess in his late 20s.
Cryptocurrency could be part of the financial bunkers that people can hide in when the blow-back from these inflationary spending happens.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.