Amp Is Having a Rough Start in 2022, But That Shouldn’t Last Long

This is the first time I’m writing about the cryptocurrency Amp (CCC:AMP-USD). I have to say that, even as someone who is staying out of the crypto markets, I’m intrigued. The reason it has piqued my interest is that Amp’s core objective is to solve a problem. Amp seeks to solve the insecurity that lenders have about ensuring that transactions made with cryptocurrencies will be paid in a timely fashion in the currency of their choice.

A digital image of the Amp (AMP) crypto logo in bright pink.

Source: Shutterstock

But offering users a solution to a real-world problem hasn’t stopped the token from being caught up in the current cryptocurrency sell-off. In the last month, Amp is down about 21%. And since the token briefly traded above 12 cents earlier in 2021, a price of just 3.8 cents as of this writing is significant.

That being said, the drop in Amp’s price looks like a case of guilt by association as investors may be looking to move into risk-off assets. However, as crypto investors revisit beaten-down cryptos, Amp looks like it will get off the mat.

Amp Has a Defined Use Case

When I first wrote about Ripple (CCC:XRP-USD), I remarked that the underlying technology excited me more than the actual token. Ripple was created to let cryptocurrency solve the barrier to cross-currency transactions.

According to Coindesk, “Amp allows users to provide AMP tokens as collateral for transactions on the Bitcoin, Ethereum and other cryptocurrency networks. If transactions take too long to process or are unsuccessful, AMP tokens are liquidated to cover the costs so that the receiving party still gets paid.”

In marketing speak, that’s providing a value beyond price. And that’s something I can get behind.

The Ultimate Backup Plan

Essentially, Amp is helping to overcome a fundamental limitation of blockchain networks like Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD). Because they are global, distributed systems, validating transactions can take more time than users would like. Because the networks have limited space, users may need to pay an extra fee (known as a gas fee) to have their transaction prioritized.

But Amp serves as collateral, allowing users to avoid paying these fees. And because Amp is considered a secure method of payment, users can assume the transaction goes through instantly.

I’m not going to pretend that I understand all the technical ins and outs of Amp. But I’ll take the creators’ word for it. Logically, anything that takes away the uncertainty surrounding cryptocurrency transactions is good for cryptocurrency in general. That’s what Amp provides.

Amp has something that other cryptos, particularly some altcoins, seem to lack. That something is a utility that, for now, isn’t easy to duplicate. And as InvestorPlace contributor Mark Hake points out, if Flexa, the company that created Amp, begins to deliver solutions for the smart contracts needed for decentralized finance (DeFi), decentralized apps (dApps) and non-fungible tokens (NFTs), it would make the case for Amp more bullish.

Amp Is a Bridge and Perhaps Much More

For now, Amp seems to be focused on the debit side of the transaction ledger. However, there could be real possibilities for the cryptocurrency if it starts to facilitate a cryptocurrency credit market.

That’s another intriguing consideration. And it does seem like Amp is a bridge to something else. But until that something else exists, this is one token that’s likely to move higher.

At some point in every article I write about cryptocurrency, I make it a point to mention that this remains a highly volatile asset class. The price of the token has declined by 7.7% in the last seven days.

And for that reason, you need to do your due diligence in whatever form that takes. If cryptocurrency is like a second language for you, l’d encourage you to study the token’s whitepaper. Short of that, just remember to not invest any more than you can afford to lose.

On the date of publication, Chris Markoch 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 Publishing Guidelines.

Chris Markoch is a freelance financial copywriter who has been covering the market for eight years. He has been writing for InvestorPlace since 2019.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC