Since I last wrote about it, a major event has happened with Cardano (CCC:ADA-USD).
The altcoin’s much-anticipated Alonzo upgrades are complete, following the hard fork on Sept. 12. As you may know, following these upgrades, this blockchain network now has smart contract capabilities.
With said capabilities, it’s in a better position to give its larger rival, Ethereum (CCC:ETH-USD), a run for its money when it comes to usage in decentralized finance, or DeFi, transactions.
You would expect this event to fuel a further rise in value for Cardano. But instead, the price of its native token has pulled back. In selling the news, many crypto traders have decided to take profit. As a result, prices have pulled back from above $2.75 on the hard fork date, to around $2.24 as of this writing.
This, however, may be your opportunity, whether you have yet to buy it or if you are thinking about adding to your position. Buying Cardano as a long-term bet on it becoming the eventual “Ethereum killer” could be a wager worth making.
High risk, of course, is still a factor here. Many factors remain that could cause the recent crypto comeback to reverse course. Yet if you’re looking for a high-quality crypto with more upside potential than either ETH or Bitcoin (CCC:BTC-USD), this may be your best option.
The Alonzo Hard Fork and the Subsequent Sell-Off
Crypto aficionados and newbies alike can appreciate how much of a game changer the Alonzo upgrades are for ADA-USD. Before, this token’s blockchain was one of many looking to challenge Ethereum’s DeFi dominance. But now? It appears to be the front-runner, better positioned to grab a piece of this fast growing space than similar names like Polygon (CCC:MATIC-USD) and Solana (CCC:SOL-USD).
However, this hasn’t resulted in a continued surge in price for Cardano. Instead, traders who may have bought it shortly before the start of the mid-July crypto comeback decided to cash in some of their chips. In fact, even before the hard fork’s completion, traders were selling on the news.
Shortly after upgrades were rolled out on the testnet on Sept. 1, Cardano made its way above $3 for the first time. It experienced its slide between Sept. 1, and its Sept. 12 mainnet debut (i.e., the hard fork). Granted, a lot of its decline during this time frame was due to the overall crypto flash crash that happened on Sept. 7. But the desire to realize gains after hitting a new price milestone was likely another driver for the increased selling.
In the coming weeks, more traders may be looking to cash out than double down. This may limit its ability to make its way back above $3 per token. Or worse, push it further back toward $2 per token. But while many are selling, doing the opposite may be the better move.
Why Buying the ADA-USD Dip Could Pay Off
Cardano, not to mention other major cryptos like Bitcoin and Ethereum, may seem like they have hit a near-term top. But while prices could get stuck or even or sell off if there’s another round of volatility, investors with a longer time horizon may want to consider entering this particular altcoin at or below today’s prices.
Cardano has tremendous upside potential, assuming it manages to become as widely used in DeFi as Ethereum. At first glance, this may seem far-fetched. But as one Seeking Alpha commentator made the case late last month, there may be a path for it to happen.
Cardano already runs on proof-of-stake (PoS), while Ethereum is still working on its transition from proof-of-work (PoW) over to PoS. It also has other advantages like its dual-layer design, coupled with its new smart contract capabilities. That gives Cardano a decent chance of catching up to its more widely used rival.
If increased usage pushes Cardano to a market capitalization as Ethereum, the token could see its price surge to around $10.
Still Risky, But Perhaps Your Best Choice Among the Altcoins
In the crosshairs of securities regulators and the tax man, a lot’s still playing out that could negatively affect crypto prices from here. Not to mention the risk of subsequent flash crashes that are hard to anticipate.
Exercising caution is key to investing in this, or any other cryptocurrency. Position accordingly. But despite its risks, given it may have greater upside potential than other high-utility coins, you may want to take advantage of its post-hard fork sell-off, and enter (or add to) a position in Cardano.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.