Cardano Is Volatile, But Its Long Term Potential Is Huge

Cardano (CCC:ADA-USD) is among the hottest altcoins in the crypto market. The third-generation cryptocurrency has grown more than 800% in value in the past 12 months. Moreover, it has witnessed one of the most significant price jumps for any altcoin since the beginning of this year. It has also been among the more resilient digital assets in the recent crypto sell-off. Cardano has shown to have real-world utility for its users, and with multiple catalysts, it has an incredible growth runway ahead.

The Cardano (ADA) token with other gold and silver tokens in the background.

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Cardano is a proof of stake cryptocurrency that Ethereum (CCC:ETH-USD) co-founder Charles Hoskinson built in 2017. The primary objective behind developing the Cardano blockchain was to develop a flexible and energy-efficient alternate to Ethereum. Hoskinson felt that Ethereum’s massive energy requirements would make it an impractical solution down the road. Though it handles only a fraction of transaction volumes of the leading cryptos, it has a vast potential to evolve into being the “Ethereum killer.”

Reasons To Be Bullish

There are multiple reasons why crypto analysts and investors are bullish on Cardano’s potential. For starters, the platform is primed to handle substantial volumes of transactions. It can process up to 257 transactions per second, and future updates target 1 million transactions per second.

Furthermore, it is much more eco-friendly than its peers. A lot of it comes from being built on a proof-of-stake system where validators, with an equity stake in the platform, need to hold their coins to facilitate the transactional process. On the flip side, the proof of work model involves an enormous energy cost, making for a highly inefficient process.

Another differentiating factor for Cardano is that it’s based on peer-reviewed scientific research. This means that a substantial amount of time and effort has been put into exploring its technical possibilities and subsequently reviewed by experts in the field. This is perhaps why it has taken its time in implementing various functionalities.

One of the most talked-about features for Cardano is its smart contract functionality. This will allow developers to build apps that interact with popular decentralized exchanges. Cardano is still testing things out with its smart contract update but continues to make progress. The update will likely become a major needle-mover for the ADA token.

Years to Go

Cardano has a lengthy roadmap for its future progress, which should culminate by 2025. With a long way to go before it finishes its journey, investors should be wary of the risks that come with investing in ADA right now. Volatility is the first one. Cardano’s price has witnessed sharp swings in the past few months, and investors need to be comfortable with the rollercoaster ride.

Regulation has been a major thorn in the side of the crypto market. China has taken a highly aggressive approach against cryptocurrencies, and other countries might soon follow suit. More regulation is likely to weigh in on Cardano’s price in the future.

Moreover, with millions of dollars involved, it’s no surprise that hacking and theft is a key concern for the crypto market. Instances of high-profile wallet and exchange hacks could escalate over time.

Bottom Line on Cardano

Investors have embraced Cardano as an eco-friendly token with long-term value. It has been killing it in the past year, blowing past the $2 mark back in May this year. With the full release of its smart contract update and other new features, it stands to gain massively by the conclusion of this year and beyond. It’s down more than 23% this month, which presents an excellent opportunity to scoop it up at a considerable discount.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


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