Cardano (CCC:ADA-USD) investors have seen record gains in 2021. ADA, the native currency of the Cardano platform, is up around 1,100% year-to-date (YTD) and has returned an incredible 2,000% in the last 12 months.
In other words, if you had put $1,000 in Cardano last October, your investment would be worth around $21,000.
ADA currently trades at $2.15, ranking it the fifth most valuable cryptocurrency with a market capitalization of $68.6 billion.
By comparison, Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and Binance Coin (CCC:BNB-USD), the three largest and widely followed cryptos, have returned around 114%, 458% and 1,190%, year-to-date. Their market caps are about $1.17 trillion, $487 billion and $82.8 billion, respectively.
The popularity of blockchain technologies, as well as cryptos, picked up the pace amid the pandemic, in part thanks to thanks to the growth in peer-to-peer (P2P) trading platforms.
“Many emerging markets face significant currency devaluation, driving residents to buy cryptocurrency on P2P platforms in order to preserve their savings,” according to research provided by ChainAlysis.com.
As a result, the global adoption of cryptos has surged over 880% over the past year.
Given this year’s lucrative returns, readers wonder what might be next for ADA. Despite potential near-term choppiness, Cardano stands out as one of the strongest crypto opportunities likely to increase in value in the long term. Let’s dive in and see why.
Cardano Is a 3G Altcoin
Launched in 2017 by Charles Hoskinson, co-founder of Ethereum, Cardano is used for decentralized applications (DApps) and digital contracts.
The platform is regarded as a leading third-generation (3G) cryptocurrency, which “aims to solve the issues facing the first two generations,” or Bitcoin and Ethereum. The main question is scalability, or how a system performs as processing needs change.
As research led by Shehar Bano of University College, London, highlights, “Two metrics are directly related to blockchain scalability: transaction throughput (the maximum rate at which the blockchain can process transactions) and latency (time to confirm that a transaction has been included in the blockchain).”
Cardano is scalable as it can handle a large number of transactions. For example, Bitcoin and Ethereum networks can process around 7 and 15 transactions per second (TPS), respectively, while Cardano can achieve 257 TPS.
Additionally, it recently released the Alonzo hard fork upgrade with which it aims to integrate smart contract functionality and enhance flexibility.
Furthermore, each digital currency uses its own algorithm to ensure blockchain accuracy, which takes us to the second bottleneck issue 3G altcoins are expected to address. Using the decentralized proof of stake (PoS) blockchain platform, Cardano offers a more sustainable and eco-friendly alternative to Bitcoin, Ethereum and other altcoins that use proof of work (PoW) mechanism.
Other Tailwinds Supporting ADA
“The global crypto asset management market size was valued at $0.67 billion in 2020, and is projected to reach $9.36 billion by 2030, growing at a CAGR of 30.2% from 2021 to 2030,” according to a new report from Allied Market Research.
In the years ahead, digital assets that offer utility, as well as a hedge against inflation, are likely to attract more investors.
Cardano is currently used for various applications, such as storing tamperproof records for students, keeping records of metrics like customer creditworthiness, providing supply chain tracking for farmers or authenticating pharmaceutical orders to avoid the risk of getting counterfeit medications.
Investors recently also welcomed the news that “Emurgo, the commercial and venture arm of Cardano, is investing $100 million to boost decentralized finance (DeFi), non-fungible token (NFT) products and blockchain education efforts for the world’s fourth-largest blockchain.”
Finally, unlike Ethereum which has an unlimited supply, Cardano has a fixed coin supply of 45 billion, and currently around 32 billion are in circulation. With ADA’s popularity taking off, the limited supply could only lead to a price increase.
In summary, Cardano has been gradually strengthening the foundations to be a game changer in the blockchain. It is also becoming a reliable competitor against Ethereum which ranks as number one in smart contract platform.
The Bottom Line on Cardano
In addition to the surge in price of cryptos, there is also anecdotal evidence of the growing interest in digital assets.
For instance, according to an online survey conducted with 1,080 Americans, more than 73% of participants believe cryptocurrencies could replace the U.S. dollar, and nearly 21% anticipate it to happen within the next decade.
Although such a survey does not necessarily suggest scientific evidence, it nonetheless shows further positive sentiment for altcoins.
Given the increased use of the Cardano network as well as its smart contract capabilities, ADA is likely to reach new highs in the months ahead. Therefore, buy-and-hold investors could consider investing at the next pullback to increase the margin of safety.
Yet, holding crypto assets may not be appropriate for all portfolios. For instance, concerns over the lack of regulation have been increasing.
In a recent speech, Gary Gensler, the head of the Securities and Exchange Commission (SEC), underlined the potential risks involved in the crypto universe, saying, “In many cases, investors aren’t able to get rigorous, balanced, and complete information.”
Therefore, readers who seek broader exposure to the blockchain space, but not necessarily to individual altcoins, could invest in blockchain exchange-traded funds (ETFs). Examples include:
- Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) — up about 46% YTD;
- First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR) — up about 18% YTD;
- Capital Link NextGen Protocol ETF (NYSEARCA:KOIN) — up 18% YTD.
On the date of publication, Tezcan Gecgil 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.
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.