If there’s a lesson to be learned over the latest corrective phase of cryptocurrencies, it’s that diversification is absolutely critical. As you may have noticed with my weekly crypto update, I spread my bets as widely as possible. With Ankr (CCC:ANKR-USD), I made no exception to this strategy.
Of course, the main criticism of diversification is that it limits your upside when the blockchain asset market rallies. As you know, when cryptos move, they move hard. But that’s also true for both trajectories. Unfortunately for me and millions of other investors, I’m staring at disturbing percentage-basis losses for my ANKR holdings.
It’s a darn shame too. As I explained in my write-up for ANKR in May of this year, the only issue that I saw with the protocol fundamentally is that the development team did a poor job explaining what Ankr is and more importantly, why it matters. Waxing poetic about Web3-stack deployments might pique the curiosity of fellow blockchain developers but it’s not going to do anything for the investment community at large.
After some digging around, the essence of the ANKR protocol is that it “allow programmers via a secure, confidential network to harness the supply of unused computing power within the broader global community. In return, those who ‘lend’ said power receive a financial reward in the form of cryptocurrency.”
In other words, Ankr allows entrepreneurs to connect with individuals who wish to contribute to a particular endeavor or enterprise. For instance, let’s say a development team wants to build a decentralized supply chain software. Typically, such software requires mountains of data storage. But rather than source that storage capacity from a (pricey) data provider, developers can tidbits of capacity from a massive base of individual contributing computers.
It’s a brilliant idea. The problem is, no one cares.
ANKR Is Suffering Under a Death Spiral
While the concept could theoretically spark a comprehensive paradigm shift regarding a digitalized economy — in a word, Ankr democratizes innovation like arguably nothing else before it — all ideas, no matter how profound, require capital to move the narrative forward.
Don’t believe me? According to PBS.org, Nikola Tesla proposed to financier J.P. Morgan the development of a wireless communications system that could relay telephone messages and even pictures to any part of the world.
At first, Morgan was behind the idea, which was completely fantastical at the time. However, the banker began losing faith in Tesla, eventually refusing his requests for additional financial support. And with that, the world may never know the true genius of Nikola Tesla.
I’m not going to go so far as to say that ANKR is the equivalent of one of history’s preeminent scientists and inventors. However, the blockchain protocol is at risk of getting J.P. Morgan-ed if investor sentiment doesn’t pick up soon. Sadly, I don’t think it will.
Near the end of March this year, ANKR hit a high of 19.4 cents. Using this as a benchmark, we can plot out Fibonacci retracement levels, which is a theory in technical analysis that suggests market fluctuations operate via the recurrent frequencies of nature (i.e. the golden ratio). Performing this exercise, we get the following:
- 8% retracement: 12 cents
- 50% retracement: 9.7 cents
- 2% retracement: 7.4 cents
- 6% retracement: 4.6 cents
At the time of writing price of 5.4 cents, ANKR slipped through the three key retracement levels (50% is not a Fibonacci number but technical analysts use it as an important “split” between 61.8% and 38.2%). Almost surely, the bears will push the blockchain token to the 23.6% retracement, which sits at 4.6 cents.
There’s just too much blood in the water not to.
What to Do Now?
It gives me no joy to write this but ANKR stakeholders must make a hard decision: cut your losses (or take profits if you got in early enough) or wait it out. But if you’re going to opt for the latter, you may have to wait a long time.
I’m reminded of the time when I purchased 0x (CCC:ZRX-USD) in late 2018 at a price of around 80 cents. Initially, the token jumped over 90 cents, making it one of my best short-term plays. But I held on, believing that it could shoot higher.
It did, but it would take more than two years for me to break even and eventually earn a profit. In the meantime, it was an opportunity cost as that money could have been directed toward a dividend-bearing blue-chip stock.
In my view — and from my personal experience — speculative cryptos like ANKR can definitely make a comeback. The blockchain isn’t going anywhere. But you should be prepared to wait it out for two or three years for the token to become viable again.
On the date of publication, Josh Enomoto held a LONG position in ANKR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.