As the battle for decentralized finance (DeFi) dominance carries on, new contenders continue entering the ring. One that’s been making waves lately is Fantom (CCC:FTM-USD).
Don’t let its big moves since last fall fool you. It’s no “memecoin.” While speculative frenzy is playing a role in its big run-up in price, the main driver is its fundamentals.
Instead, crypto investors are betting big that the Fantom platform will continue to expand its presence within the DeFi space. So far, this has been a winning wager. If its network stays on its current trajectory, it could continue to be.
That said, while there’s more rationality with this risky altcoin than, say, the “pupcoins” such as Shiba Inu (CCC:SHIB-USD), or “metacoins” like Decentraland (CCC:MANA-USD), that doesn’t mean this is a “bet the ranch” type of play.
Very volatile, there’s the added risk that it tumbles further if the “crypto bear market” continues.
“Tread carefully” is the keyword here. As the story behind it is still in its early stages, you may be able to take a “wait and see” approach, without “missing out” on this opportunity.
Fantom at a Glance
So, what’s behind this cryptocurrency’s big increase in price over the past few months? First, let’s take a look at the platform behind the FTM and see why it’s resulted in this elevated level of buzz and excitement.
FTM is the native token of Fantom, which according to CoinMarketCap is a directed acyclic graph (DAG) smart contract platform.
In a nutshell, DAG is an alternative structuring method for cryptocurrencies. However, its use of DAG technology rather than blockchain technology is the most important thing here.
Instead, as my InvestorPlace colleague Mark Hake recently discussed, what has made this platform stand out, and its token price breakout, is how quickly its seen major adoption by DeFi developers.
This has resulted in its network reaching $12.35 billion in total value locked (TVL).
In other words, investors have staked over $12 billion into its protocol. It’s now ranked third based on this metric, behind Terra (CCC:LUNA-USD), at number two, and Ethereum (CCC:ETH-USD), at number one.
With this big increase in usage, and with its star still rising, many are betting that this once-obscure crypto will continue to increase in value.
Still, before you put in a buy order, keep in mind that its performance in the months ahead could differ greatly from its performance in recent months.
FTM and Crypto Market Risk
Just a year ago, Fantom was trading for 13 cents per token. Today, even after its recent plunge, it’s up more than 15x.
At today’s prices (around $2.05 per token), it sports a market capitalization of $5.2 billion, making it the 29th most valuable crypto.
If this token’s platform continues to see big increases in DeFi activity, it may in time move up to the top 20. Perhaps, even an eventual move into the top ten.
There may be merit in making it a long-term moonshot wager. But if you’re looking to hop into it as a trade, you may want to think twice. Mainly, because there’s still a high risk that the crypto market will continue to be rocky as it has been recently.
The Federal Reserve’s move to raise interest rates has dampened enthusiasm for risky assets like crypto. As you likely know, established coins like Bitcoin (CCC:BTC-USD) and Ethereum have taken severe dives.
Coin-related news helped to outweigh this negative factor for Fantom in early January. Yet since Jan 15, when it was trading for around $3.30 per token, it seems to have started to have an impact. Since then, its price has dropped by around 38%.
In a few weeks, there may be another overarching factor that puts pressure on crypto prices. The Biden administration is gearing up to release a crypto-related Executive Order.
Whether more regulatory scrutiny helps, hurts, or has zero impact on this asset class, the uncertainty created by this could cause a further drop in cryptocurrency prices.
Bottom Line: Be Careful as it Pulls Back in Price
There’s a lot more behind FTM’s run-up than mere hope and hype. That makes it unique among the cryptos that have gone from zero-to-sixty in the blink of an eye.
As DeFi developers flock to its network, and as its TVL figure rises, it could continue to soar in price.
Even so, uncertainties in the market for decentralized assets, ironically enough being driven by a centralized (i.e. governmental) party, could impact its performance in the months ahead.
While it’s pulling back in price despite promising fundamentals, sitting tight, for now, may be the best move with Fantom.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. 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.
