The first and only time I’ve written about Algorand (CCC:ALGO-USD) was a few days before Christmas. Always in a good mood around the holidays, I suggested that the crypto coin had real utility and a good story to tell.
Utility is the prime metric to evaluate cryptocurrencies of any size. Bitcoin (CCC:BTC-USD) included.
I suggested that if the El Salvador project it was working on to get the country’s Bitcoin wallet up and running were successful, ALGO-USD would most certainly return to $2.
Unfortunately, the bear market that’s gripped most cryptocurrencies in 2022 has caught Algorand in its wide net. The crypto’s lost 38% of its value in 2022 through Feb. 9. As I write this, it’s around a buck.
So, other than hitting a home run in El Salvador, how does Algorand get its groove back? Let me count the ways.
Algorand Gets a Backer
InvestorPlace’s Mark Hake recently pointed out that Skybridge Capital, the hedge fund run by Anthony Scaramucci, has made a $250 million bet on Algorand on behalf of his wealthy clients and institutions. That’s one big bet.
Hake quoted a Scaramucci interview about cryptocurrencies where the Mooch sees Algorand being successful because large businesses like it’s scalable, secure, and decentralized. I continue to see decentralized finance (DeFi) as one of the most appealing qualities of the blockchain industry. There are limitless ways the average person can benefit from DeFi applications.
DeFi on Dec. 31 most likely will be far more advanced than it does today. That’s how fast this secular trend is growing and maturing. Buying some ALGO-USD gets you on the bandwagon.
I’ve always enjoyed how Scaramucci explains why he’s interested in certain investments. In this case, he believes Algorand is the “Google” of the crypto world.
That’s high praise indeed.
If you’re an aggressive investor, merely knowing that Skybridge has put $250 million into Algorand ought to get you off the fence and into a small position.
Can You Say Interoperability?
Try to say interoperability three times as quickly as possible. Unless you’re a master linguist, you’re likely to mess it up. But I digress. You hear the word a lot. But what exactly is interoperability? Algorand discussed what it is in a July 2021 blog post:
“[T]he ability of blockchains to exchange and make use of data; the ability to move a digital asset between two or more blockchains while maintaining the state and uniqueness of the asset consistent throughout the process.”
It used the example of a Google account holder trying to send an email to someone with a Yahoo account. If there isn’t interoperability, the email can’t be sent. Algorand believes that interoperability related to blockchains “would accelerate the fourth industrial revolution and transform business processes.”
Algorand’s post highlighted the conclusion from a World Economic Forum (WEF) whitepaper about the subject.
“Organizations do not want to find themselves on a blockchain platform that may limit their options for external collaboration in the future,” the WEF wrote in April 2020.
“They want to build scalable solutions that can grow with both the enterprise and the extended ecosystem if needed. Many organizations also want to remain flexible in changing or connecting to different solution.”
When I read this paragraph, I immediately thought about the hybrid cloud, and the various software applications enterprises use to run their businesses. Without the ability to seamlessly move between on-premise legacy systems and those operating in the cloud, a company will fail to meet the needs of the business.
As my InvestorPlace colleague, Muslim Farooque, pointed out recently, Algorand’s Layer-1 network “allows developers to build several applications across different blockchains.” That, to me, is a difference-maker.
The Bottom Line
There’s no question Algorand is volatile. But what cryptocurrency isn’t?
Owning Algorand today is like owning Amazon (NASDAQ:AMZN) when it first went public in May 1997. In 1997, it had a high of $10.78 and a low of $2.79. A year later, it had a high of $117.31 and a low of $8.52. That’s a significant gap.
While the general direction was up over those two years, it wasn’t without some heart-stopping moments. And, of course, in 2000, AMZN climbed to a high of $91.50 in the first quarter, only to hit a low of $14.88 by the fourth quarter in the dot.com bubble.
Algorand will have its ups and downs, but I don’t think there’s any question it’s a better buy than Dogecoin (CCC:DOGE-USD) or one of those other meme coins. If you bet no more than 3% of your overall investment portfolio on cryptocurrencies, I don’t see why Algorand shouldn’t be one of them.
Could it get to $2 in 2022? With a bit of luck and a whole lot of execution, I think it does.
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.
