As someone who has largely cashed out of the cryptocurrency madness to actualize the American dream, I’m in an admittedly enviable position to not give too much of a rat’s rear quarters where popular coins like Cardano (CCC:ADA-USD) end up.
That’s not to say that I’m an ADA hater, because I’m not. I’ll disclose it right now. I hold a long position.
So, why the cautionary take on cryptos over the last few months? Certainly, it’s not immediacy bias as digital assets have been all the rage recently. Instead, it’s the antithesis of immediacy bias, whatever that term might be. As someone who has witnessed the ebb and flow of this still-burgeoning market for years, you can say that I’ve become somewhat shell-shocked.
Frankly, it’s difficult not to feel uncomfortable about cryptos and the present euphoria. For instance, when I was previously talking about this sector this year, there were around 12,000 different coins and tokens you can invest in. Today, the figure has crossed above the 13,300 mark, according to Coinmarketcap. That makes the sector, including established altcoins like Cardano suspect.
In my view, the mania over cryptos reminds me about the tech bubble during the late 1990s to early 2000s. It’s not just about the searing valuations but the nature of the bubble. You’ll recall that several companies were launching their initial public offering, even if they weren’t profitable businesses.
Back then, we saw a record number of companies go public. Fundamentally, this is the same story for cryptos except that the backdrop is decentralized.
Of course, some will push back and say that Cardano specifically is tied to a utilitarian blockchain architecture. My colleague Faizan Farooque made this point recently, arguing that “a strong economic moat and multiple use cases mean the future is bright” for ADA.
Don’t Get Distracted with the Cardano Architecture Argument
Because I hold some Cardano coins, you might make the assumption that I don’t have the greatest confidence in a negative trajectory for ADA. And you would be correct. Several weeks ago, I mentioned that I sold a significant stake but I held some in case stuff happened.
In the crypto market of 2021, I must respect the adage that the market can stay irrational for longer than I can stay solvent. At the same time, my lack of complete confidence should not be interpreted as a green light to take a huge risk with Cardano.
Mainly – and this might be upsetting to crypto supporters – I now find the utility argument for cryptos (whether that be Cardano or anything else) overrated. I get it. Advocates will throw out terms like blockchain, distributed, decentralized, proof of stake, peer to peer. But does anybody want to ask the bigger question?
Look, centralized protocols – such as our fiat-based monetary and banking system – have many problems. One of the most pressing problems of centralization is the large number of the unbanked. Further, when you have centralization, you have centralized authorities – and those authorities invariably discriminate against “downwind” demographics.
You may consult various resources that describe systemic barriers, systematic inequality and the woes of de facto economic segregation as evidence pointing to the flaws of centralized protocols. Again, I get it. Some components of centralization stink.
But will decentralization – that is, doing the opposite of what society is doing now – solve the problem?
Not only will decentralized protocols create its own unique problems, it might make the situation worse. That’s why I’m hesitant on Cardano and cryptos in general. The underlying blockchain technology requires the consensus of the masses – and the masses are not reliable.
Just Focus on the Technicals
Turkish playwright, novelist and intellectual Mehmet Murat Ildan stated once that “In low intelligent ignorant societies, the clever are denigrated and the stupid are belauded; the brainy are stoned and the dull are held in high esteem!”
I’m not going to say that crypto proponents are dimwitted but if you think about it, open-source blockchain protocols invariably depend on the ethos of either the wealthy or the early backers of a particular network. But what exactly are their qualifications to dictate the trajectory of a digital community other than they have a lot of money?
Democratization? No. I think what you will find with decentralization is pure anarchy, the ignorance of the masses – or at least the masses with cash – becoming the law of the land.
Therefore, if you’re going to gamble on Cardano, I would completely ignore the fundamental argument and stick with technical analysis or whatever other methodology you’re comfortable with. Even just banking on the straightforward greater fool theory will probably be more constructive than assessing Cardano’s fundamental value.
On the date of publication, Josh Enomoto held a LONG position in ADA. 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.
