A few months ago, alternative cryptocurrency Cardano (CCC:ADA-USD) received an extraordinary honor. World-famous publication Bloomberg mentioned ADA, stating that the digital asset ranked third among all cryptos based on market capitalization.
Sure, valuations ebb and flow in the virtual currency space. Still, it was quite a credibility boost.
You’ll recall that when cryptos first flirted with mainstream acknowledgment back in the early part of the last decade, any mention at all about Bitcoin (CCC:BTC-USD) that didn’t come from an underground bunker blog was huge.
Now, mainstream business news features regular BTC coverage, along with altcoins like Cardano.
Sure, some hardcore blockchain proponents will dismiss the accolades, claiming Cardano and its ilk don’t need acknowledgment from the media suits to justify their existence. Fair enough.
However, there’s no such thing as bad publicity when you’re attempting to change hearts and minds, and ranking just behind Bitcoin and Ethereum (CCC:ETH-USD) is a massive accomplishment.
In the crypto fallout that saw BTC drop from nearly $70,000 to today’s price of around $57,500, we’re finally putting the HODL (hold on for dear life) principle to the test. Yeah, you can say that you’re holding the line but talk is cheap, and comments are on YouTube are even cheaper.
Having already achieved modestly notable goals with cryptos (and having punched out), I like to think I’m a crypto believer but a calm, objective one.
I’m also holding Cardano coins with house money, having sold a large percentage of my holdings when ADA was trading above $2.
Please note that I also disclosed my reservations (and the sale) about Cardano in early September. I’m not going to get things right 100% but I always try my best to keep readers informed. This segues into another warning.
The Beneficiary of Cardano Is the One Holding the Cash
Devout followers of Abrahamic religions will be familiar with this passage from Ecclesiastes: “What has been will be again, what has been done will be done again; there is nothing new under the sun.”
On the surface, bringing up this aphorism seems completely ridiculous when discussing cryptos like Cardano. Of course, the blockchain is different from any other investing institution.
For example, a unique attribute of virtual currencies is that they trade 24/7/365 for all retail investors. To my knowledge, that’s never been done for any stock or commodity.
But in scientific terms, comparing Cardano to a publicly traded security is a matter of displacement. Surely, flying in a jetliner at cruising altitude will lead to a greater displacement than say running and jumping from one point of the street to another.
But what’s the more thrilling experience? An airplane flying level at constant velocity is a “boring” experience because there’s no acceleration. In contrast, the process of being able to make the jump requires a change in velocity and hence a non-zero acceleration.
Why bring this up? Well, when investors put their money into something — stocks, commodities, cryptos, whatever — they want a change in their velocity, preferably from a positive number to an even greater positive number. So, the underlying platform itself doesn’t matter. That’s what nothing new under the sun means.
Further, with Cardano right now, the biggest winner is the one holding the cash because the cash holder can buy more coins at a lower price, should they desire, if ADA continues to fall,
Personally, I believe that realization will hit the crypto market if digital assets don’t start moving up soon. Because as of now, you can’t do anything with ADA other than exchange it for real or virtual currencies.
The Masses Become the Liability
In a rather sick irony, the ardent blockchain proponents who could care less about the mainstream giving coins like Cardano their rightful dues may be onto something. Sure, on one hand, it’s amazing to have more people pile into cryptos. But when the smelly stuff hits the fan, the masses can become a huge liability.
Let’s be brutally honest: HODL-ers are a rare breed. To be happy about losing 70%, 80%, 90% of your portfolio based on the belief that the underlying assets will swing higher points more toward psychological illness than toward sound investing strategies.
Most people have a breaking point and will spare themselves total catastrophic losses. But in so doing, the price of the target crypto will likely continue to fall.
That’s why I think Cardano falling from the third-place spot to sixth place is very significant. It’s a reminder that at any moment, the tide can turn against you. When it does, the results can be ugly.
On the date of publication, Josh Enomoto held a LONG position in ADA, BTC and ETH. 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.