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Wait for Market Volatility to Subside Before Buying Cardano

/With its price slumping and continued volatility in the cryptocurrency market, now might be a good time to pump the breaks on digital asset Cardano (CCC:ADA-USD).

Cardano (ADA) token with blue and orange digital background.

Source: Shutterstock

Cardano: Deteriorating Price

While there’s still much to like about Cardano and many analysts remain bullish on its long-term prospects, the digital coin’s price has fallen 23% in the past month to its current level of just $1.54. ADA-USD has been dragged down with the broader cryptocurrency market. Continued volatility has brought down the price of Bitcoin (CCC:BTC-USD) by from its all-time high of just over $64,000 to its current price of $39,680. Ethereum (CCC:ETH-USD), the second most valuable cryptocurrency, is 42% below is all-time high reached this past spring.

Much of the volatility is due to ongoing crackdowns on cryptocurrencies in China and the threat of regulations in the U.S. With volatility likely to continue in the near-term and no indications that Cardano has reached a bottom, investors may want to wait on the sidelines until they can get a better sense of where ADA-USD is headed and the future direction of the broader market for digital coins and assets.

That said, it is worth pointing out that despite its recent pullback, Cardano remains up 781% year-to-date. ADA-USD was trading at just $0.17 at the start of January. Investors who bought Cardano at the right time should have no complaints.

 Long-Term Potential

While the short-term outlook for Cardano remains unclear, the digital coin that was invented in Switzerland in 2017 by the same person who co-founded Ethereum still has long-term potential as one of the more functional and useful cryptocurrencies. The blockchain technology that underpins Cardano is used for what are known as “smart contracts,” those that execute the terms of a contract or a legally binding agreement. This practical function sets ADA-USD apart from thousands of other cryptocurrencies, the majority of which serve no useful purpose.

Because of its functionality, Cardano is classified as a “utility token.” The company’s open-source blockchain is also peer-reviewed by scientists who work in academia as well as by professional computer programmers. Additionally, Cardano’s blockchain technology is used to support non-fungible tokens (NFTs), which have become popular this year with collectors all over the world. Commonly referred to as “digital art,” NFT sales have exploded this year, with some NFTs selling for millions of dollars at auctions. Exposure to NFTs could further boost the price of ADA-USD.

$49 Billion Market Cap

With a current market capitalization of about $49 billion, Cardano remains one of the largest “altcoins”, defined as a cryptocurrency other than Bitcoin, which is the original and largest digital coin. Ether remains the largest altcoin at the moment. However, with its market capitalization, Cardano sits among the top 10 largest cryptocurrencies. Considering there are nearly 10,000 cryptocurrencies now in existence, cracking the top 10 is significant.

Cardano’s future price should be helped by the fact that ADA-USD can now be bought and sold on the Coinbase (NASDAQ:COIN) cryptocurrency exchange. Coinbase is the largest cryptocurrency exchange to offer ADA-USD to date. Before this year, Cardano was only available on obscure crypto exchanges, putting it out of reach of most retail investors. The inclusion on Coinbase can only help Cardano and its owners in the long run.

Wait On Cardano

Cardano remains one of the better cryptocurrency assets investors can buy today. ADA-USD is a digital asset with plenty of upside potential. However, the current volatility makes it too risky to buy Cardano right now. On many trading days, it looks like the entire cryptocurrency market will either crash into a cloud of dust or run to all-time highs. Which way the market ultimately goes and where ADA-USD gets dragged with it is unknowable at this time.

With its price falling and the current market swings, investors would be best advised to take a wait-and-see approach with Cardano. Keep an eye on ADA-USD, and be ready to buy when it looks like the market has stabilized and Cardano is again moving in a positive direction. Until then, put your money to work elsewhere. There are many safer ways to gain exposure to the cryptocurrency market than to buy altcoins such as Cardano directly.

Disclosure: 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 Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia. 

Article printed from InvestorPlace Media,

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