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Algorand’s Got Real Utility, But Should You Buy?

InvestorPlace’s Mark Hake discussed at the end of November how Algorand (CCC:ALGO-USD) could become the next Solana (CCC:SOL-USD). 

A logo for Algorand (ALGO) on a patterned background
Source: Shutterstock

My colleague’s article immediately caught my attention. 

That’s because I believe Solana and Cardano (CCC:ADA-USD) are the cryptocurrencies providing the most utility at present. But, of course, I’m still getting to know many of the fledgling cryptos that exist. So it will take more time to assess the pros and cons of many of them.

I have never written about Algorand, so to see Hake, who’s become quite the crypto connoisseur, suggest that its work in Latin America could make it a player in the blockchain world, my utility radar immediately went off. 

You see, I won’t get close to recommending a cryptocurrency if it doesn’t have real and tangible utility. It can’t just be a shiny digital coin. It’s got to provide real value beyond providing investors with an alternative currency to the U.S. dollar, etc. 

The El Salvador project suggests I should get to know Algorand better. That doesn’t mean, however, that I should buy it. 

Here’s why.

Algorand Beyond El Salvador

It’s fair to say that not everyone’s impressed by the tiny Latin American country’s attempt to make Bitcoin (CCC:BTC-USD) a legitimate form of payment in El Salvador. 

Kurt Wuckert Jr., the chief bitcoin historian at CoinGeek, recently wrote an opinion piece that skewered the country’s wannabe dictator, Nayib Bukele, along with its plan for Salvadoreans to use the Chivo Wallet to hold Bitcoin. 

“Like many Salvadorans, Juan is concerned about the purchasing power of the local currency,” Wuckert Jr. wrote on Dec. 17. 

“Actually, no, he probably isn’t because El Salvador uses U.S. dollars, and despite some of the very real problems with U.S. fiat, the dollar is a welcome cornerstone of stability in a country where the President is cited for bringing the military into the chambers of their legislature to make sure they know who’s boss!”

While I’m impressed Algorand is providing the payment rails underpinning the Chivo app, it would be more impressive if it were doing the same thing for a first-world or even second-world country. But El Salvador?

Hey, I am confident that the citizens of El Salvador are lovely people. But, unfortunately, the same definitely can’t be said for its president or its economy.  

A recent opinion piece by U.K. cryptocurrency journalist David Girard in Foreign Policy suggests 91% of the people in El Salvador want U.S. dollars, while less than 5% are rooting for Bitcoin. 

The author goes on to ridicule the country’s Bitcoin mining operation in Berlín. 

“The world’s average price for bitcoin mining is around five cents per kilowatt-hour; but industrial rates in El Salvador are 13 to 15 cents per kilowatt-hour. In one four-day period, the Berlín operation mined $269 of Bitcoin—and was estimated to have spent at least $4,672 worth of electricity doing so,” Girard wrote on Dec. 6. 

The powers that be at Algorand can’t be happy about all the poor public relations it’s getting around its El Salvador project. However, it would have known the optics wouldn’t be good given the president’s reputation inside and outside El Salvador.

The Bottom Line

There is no question that decentralized finance (DeFi) is very attractive to emerging markets. So, Algorand helping El Salvador get its Bitcoin wallet up and running is evidence that it is making progress in its plan to provide countries with central bank digital currency (CBDC) infrastructure.

“The Marshall Islands recently issued its own CBDC known as SOV (Sovereign),” International Banker reported on Nov. 30. “It is being run on the ALGO protocol due to the speed, scalability and security that it offers. The SOV currency will circulate throughout the country alongside the USD.”

According to the publication, 81 countries are exploring introducing a digital currency. These countries account for more than 90% of the world’s gross domestic product (GDP). 

As my colleague suggests, if the El Salvador project is a success – it’s not looking good as we enter the final days of 2021 – there is no question that ALGO-USD will climb back above $2, where it briefly traded in November. 

While the Latin American project’s success is a big if, I do think speculative investors ought to consider Algorand in 2022. It’s got utility and a decent story to tell.

That’s more than half the battle.  

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. 

Article printed from InvestorPlace Media, https://investorplace.com/2021/12/algorand-has-real-utility-but-should-you-buy/.

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