Algorand (ALGO-USD) has a lot going for it. Although not as well known as Ethereum (ETH-USD), or major “Ethereum killers” like Cardano (ADA-USD), its founder Silvio Micali has lofty goals about making this platform a major force in making decentralized finance (DeFi) mainstream.
Furthermore, it’s putting into place upgrades that will further burnish its functionality. This points to a bright future, and possibly a move to higher coin prices in the long-term. That said, I wouldn’t count on its native coin, still down big from where it was last fall, bouncing back in the short-term.
Why? The crypto market is still trying to thaw out of its so-called “winter.” That is, following the big drop in cryptocurrency prices, enthusiasm for crypto has a ways to go before it is near levels seen as recently as six months ago.
As I discussed recently, while talking about Ethereum, instead of bouncing back, the crypto market could remain very volatile in the months ahead. Mostly, due to the high correlation that exists today between the stock market and the crypto market. As more speculative stocks remain challenged by the prospect of rising interest rates, so too could this asset class.
This could mean crypto prices languish at present levels in the months ahead. Or worse, experience another hard drop to lower price levels. One crypto market expert, BitMEX CEO Arthur Hayes, predicts this will happen in June.
While talking specifically about Bitcoin (BTC-USD) and Ethereum, if both these established names take another dive, it’s very likely Algorand will drop once again as well. Given that, at around 76 cents per coin, it’s currently trading not that far off its 52-week low (just over 67 cents per coin), you may think it may have less downside risk than comparable names.
However, it’s not set in stone this will prove true. Given its smaller size, more volatility could result in an outsized decline in price. A move back to 30 cents per coin may not be out of the question. That’s what it traded for at the end of the last crypto bear market (late 2020).
If you have a long time horizon, the prospect of high volatility may not be a deal breaker. Still, given the choice between buying Algorand now, or down the road? You may want to opt for the latter. There’s a good chance a more favorable long-term entry point emerges.
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.