As the risk-off pivot continues, cryptocurrencies continue to flounder. Just like it was a few weeks back, that’s especially the case for Cardano (CCC:ADA-USD). On Dec 8, when I last wrote about this altcoin, it was trading for around $1.40. Today? It’s changing hands for around $1.21.
At present levels, it’s given back all of its gains related to September’s Alonzo upgrade, and then some. Sure, this isn’t entirely due to the current state of the crypto market. Developments such as eToro’s plans to restrict trading in it on its platform starting Dec 26 have played a role in its decline as well. With more working against it than for it right now? In the near-term, ADA-USD could struggle to bounce back. Or worse, slide further toward $1 per token.
So, what’s the best move right now? It depends on your approach to crypto. Traders looking for fast money trades may still want to steer clear. Getting in early on whatever replaces “metacoins” as the hottest area in crypto may be your best move. But if you’re a long-term crypto investor, confident that DeFi (decentralized finance) will eventually go mainstream? This remains one of your best options.
The market may be souring on it. It may never supplant Ethereum (CCC:ETH-USD) as the leading DeFi ecosystem. Nevertheless, it still has a shot of seeing materially higher usage in the years ahead. In turn, sending its token price to much higher levels.
Cardano Keeps on Making The Right Moves
Today’s market environment may make you question the merit of holding a position in ADA-USD. But it’s important to keep in mind that this crypto’s developers continue to make the right moves. Even as investors aren’t appreciating this fact right now. What do I mean by “right moves?”
Cardano founder Charles Hoskinson, in a recent ask-me-anything (AMA) session, argued that, over the past two years, every major metric for the health of the crypto has improved. That includes active users, amount staked, transaction volume, as well as the proliferation of dApps (decentralized apps) within its ecosystem. In the same AMA session, Hoskinson also hinted that “significant updates” are set to occur next year.
A big update he may have been hinting at could be the launch of Cardano’s Hydra scaling solution. As Cryptoslate.com reported Dec 17, a GitHub post by Sebastian Nagel, a software engineer for the crypto, may imply it goes live earlier than its previously estimated late 2022 launch.
Hydra, which could potentially give it transaction speeds of up to 1 million per second, may be what enables it to move ahead of Solana (CCC:SOL-USD), and become the top undisputed “Ethereum killer.” In short, a development like this could be more than enough to send ADA shooting sharply higher, after months of heavy losses.
Further Deflating of The ‘Crypto Bubble’ Remains Big Risk for ADA-USD
A launch of Hydra next year could help Cardano to make a partial recovery. Over a longer time-frame, possible gains could be even more massive. If this upgrade enables to grab a large piece of the DeFi economy, it may be able to one day join the ranks of Bitcoin (CCC:BTC-USD) and Ethereum, with a market capitalization of well over $100 billion (its market cap is around $41.2 billion today).
Then again, this bull case makes one big assumption: that crypto will re-enter bull market mode after its recent downturn. This is hardly set in stone. If investors continue to move into less risky assets? Prices of more speculative assets like crypto could continue to fall.
Even after the dust settles, future returns could wind up being far less impressive than what we’ve grown accustomed to over the past year. Cryptos could take many years to get back to their respective high-water marks. Much like how many tech stocks took nearly a decade to hit new all-time highs after the dot-com crash.
That said, I wouldn’t say it’s set in stone history will rhyme this way. But if you aren’t confident “this time it’s different,” you may not want to enter a position in this, or any crypto, right now.
Bottom Line: If Bullish on Crypto’s Future, Buy Cardano
Again, short-term traders should stay away from ADA-USD. This altcoin could continue to deliver disappointing returns in the interim, making it a bad trading vehicle. So too, should long-term investors who, like I discussed above, don’t fully believe “this time, it’s different.”
However, if you’re bullish on crypto’s future? You may want to buy it. If blockchain continues to gain critical mass, Cardano could rise to prices many times what it trades for today.
On the date of publication, Thomas Niel held LONG positions in Bitcoin and Ethereum. He did not hold any of the 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.
