Long-term holders of Cardano (CCC:ADA-USD) have seen great returns in the first half of 2021. Despite the rapid-sell off in most digital assets in the past few weeks, year-to-date, ADA-USD is up over 610%. Put another way, the proverbial $1,000 invested in the crypto would now be worth around $7,100.
The crypto’s 52-week range has been 76.1 cents to $2.4618. At the recent price of $1.29, ADA sports a market capitalization of $41.3 billion, ranking it among the top five cryptos in the market. In July, cryptocurrency asset manager Grayscale added Cardano to its Grayscale Digital Large Cap Fund (OTCMKTS:GDLC).
By comparison, Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), the two largest and widely followed cryptos, have appreciated 12% and 168%, respectively, YTD. Their market caps are about $614.9 billion and $233.5 billion.
Those InvestorPlace.com readers who wonder how other Wall Street darlings have fared in 2021, as compared to theses digital currencies, might be interested to see the following equities returns:
- Apple (NASDAQ:AAPL) — up ~ 11.1% YTD, market cap is ~ $2.46 trillion
- Facebook (NASDAQ:FB) — up ~ 29.8% YTD, market cap is ~ $1.01 trillion
- Netflix (NASDAQ:NFLX) — up ~ 0.5% YTD, market cap is ~ $240.1 billion
- PayPal (NASDAQ:PYPL) — up ~ 30.5% YTD, market cap is ~ $357.6 billion
- Pinterest (NYSE:PINS) — up ~ 10.5% YTD, market cap is ~ $46.1 billion
- Tesla (NASDAQ:TSLA) — down ~ 5% YTD, market cap is ~ $633 billion
Given the juicy returns in cryptocurrencies, Cardano bulls may now wonder if the run-up in ADA-USD can continue in the rest of the year. Interested investors should remember the altcoin space is very choppy, especially in the short-run. Nonetheless, the long-term up move in many cryptos like Cardano is possibly just beginning. Let’s see why.
Cardano and Cryptos’ 3G
Over the past decade, the valuation of Bitcoin, the poster child of digital assets, has mainly depended on trust, acceptance, and of course, speculation. Most crypto analysts regard Bitcoin, the prime example of decentralized peer-to-peer (P2P) digital currencies, as the first generation of cryptos.
Yet blockchain, the underlying technology behind many cryptocurrencies, has broader applications outside these widely followed digital assets. Thus, the second generation focuses on the blockchain distributed ledger technology (DLT).
With its ability to securely record and transfer information, blockchain can be used in many industries. The applications, for example, extend to cross-border payments, supply chain management, logistics, smart contract in healthcare and the Internet of Things (IoT).
Many enterprises are in fact only getting started in utilizing the blockchain technology. For instance International Business Machines (NYSE:IBM) has worked on “500 IBM Blockchain projects so far.”
Finally, the third generation, or 3G, of cryptos and blockchain platforms are now focusing on scalability and interoperability. Scaling is about handling large number of transactions, an area where Bitcoin is regarded as weak.
Interoperability refers to blockchain networks to communicate with each other so that they can share information. Researchers point out that only through interoperability can the use of blockchain technology reach its full potential in different industries.
Cardano, a Proof-of-Stake (PoS) blockchain, is one of the third-generation platforms. Set up by Charles Hoskinson, a co-founder of Ethereum, it was released in 2017. Followers expect the Cardano network to lead in creating decentralized applications (DApps) and building smart contracts. On a side note, PoS coins require less energy to mine than other top coins which rely on the Proof-of-Work (PoW) algorithm.
For instance, the Cardano Foundation has recently launched its five-year vision. The objective is to have “50 banks on board by next year that will use ADA will secure their blockchain a bigger customer base… The banking partnership would enable Cardano users to easily convert fiat to ADA and vice versa.”
The Bottom Line on ADA
To be sure, 2021 has shown that alternative investments such as cryptos can enhance returns of traditional stock portfolios. As digital currencies and especially the blockchain technology become more utilized, I expect the growth tokens like ADA to continue.
Yet ADA’s technical chart shows that daily swings in price are wide. Thus, short-term Cardano traders should be cautious. But if you have a two-year to three-year horizon, you could consider having an exposure around these levels.
If the Cardano network increases its partnership with other enterprises and especially banks, it is likely to create further value for ADA-USD investors.
Finally, those readers who do not want to be caught up in the daily volatility in Cardano could consider investing in exchange-traded funds (ETFs) with exposure to cryptos and blockchain. Several examples include:
- Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) — up ~ 26.9% YTD;
- Goldman Sachs Innovate Equity ETF (NYSEARCA:GINN) — up ~ 11.2% YTD;
- Grayscale Ethereum Classic Trust (OTCMKTS:ETCG) — up ~ 378.8% YTD;
- Exchange Traded Concepts Trust – Capital Link Global Fintech Leaders ETF (NYSEARCA:KOIN) — up ~ 16.1% YTD.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.