Ankr (CCC:ANKR-USD) has appreciated in price by over 3,000% in the last year. Further, Ankr has risen by more than 1,000% in 2021, but perspective there isn’t much to like about it on a price basis.
The altcoin spiked in price in late March and has more than halved since, dropping from 22 cents to a little more than 8 cents right now.
Although it will draw in investors based on its price appreciation, I’d suggest that its true potential to make investors returns is through its use in staking Ethereum (CCC:ETH-USD).
The narrative for Ankr is this: Use it for staking smaller amounts of Ethereum, but avoid buying Ankr for future price appreciation.
Investors shouldn’t assume Ankr’s price declines are a simple byproduct of the troubles of the largest crypto players. Ankr’s slide began earlier than Bitcoin’s (CCC:BTC-USD) meaning it’s not logical to blame the downtrend on that of bigger fish in the crypto pond.
My theory is that the latest drop in crypto prices isn’t fatal, but it is a reckoning. Altcoins won’t have an easy time garnering loads of attention simply because they are altcoins moving forward. If Ankr is going to rise it can’t be on vague notions of defi’s supposed ascendancy. It’ll have to be because it actually provides utility.
There are two reasons potential investors will consider purchasing Ankr. One is the broad notions related to defi, which I find less than compelling. The second is ETH2 staking, which has more merit.
The narrative is mixed, so let’s start with the bad first and then move into the good.
Vague Defi Value Proposition
If you’re anything like me, you probably have gotten sick of several investment trends that have cropped up in 2021. One, which we won’t discuss, is wild r/WallStreetsBets investing based on very flimsy logic. The other is that anything and everything defi is bound to end up going to the moon.
That’s my knock on Ankr. The value proposition it markets on its website is really quite vague and relies on notions including that Web3 will make the internet more accessible to everyone.
Web3 promises to cut out the gatekeepers so that we, the user, can wrestle back control over the internet. Well, that’s the gist of its utility and that of Ankr too.
Call me cynical, but claims like these don’t really mean anything. Thankfully though it does feel like the market is catching on to these ideas. Call me crazy, but I don’t think many investors care about buzzword-filled websites. Rather, I believe investors care about making money.
And that brings me to the positive aspects of Ankr.
Ankr recently launched something called Ankr StakeFi. As the company’s case study states:
“The goal of Ankr’s StakeFi is to provide everyone with simple access to attractive streams of passive income without needing advanced technical skills to run validator nodes on Proof-of-Stake networks. As such, Ankr will support DeFi projects bringing utility to Internet Bonds and enabling DeFi users to generate further passive income on top of Internet Bonds to create a new Fixed Income DeFi market.”
What this really means is, holders of Ethereum can lend their ETH to mining pools through Ankr. The benefit of staking is that mined ETH provides monetary rewards. And the benefit of doing so through Ankr is that it is more accessible due to the requisite amounts.
Users can stake as little as 0.5 ETH which is pooled with other stakers in order to seek a return on mining. Ethereum 2.0 requires that users stake 32 ETH in order to mine. That’s obviously out of reach for many would be investors. Ankr allows individuals to stake as little as 0.5 ETH which is directed into larger pools to meet that 32 ETH requirement for mining.
But, while this is interesting, I don’t know that it is going to compel many people to invest in Ankr. I don’t believe many investors will be interested in buying and holding Ankr and hope that they can make a return by it simply appreciating in price.
I can understand that more aggressive crypto investors might be willing to stake ETH through Ankr in order to receive a return from such mining.
That’s the point: There’s a real disconnect between staking through Ankr, and hoping for returns by simply buying Ankr.
It will draw in smaller staking enthusiasts who want to stake their ETH into larger pools. It can make money in that way. But simply investing in Ankr is much less attractive.
On the date of publication, Alex Sirois 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.