By Tezcan Gecgil,
Investors in Cardano (CCC:ADA-USD) have had a great year so far in 2021. Despite the recent decline in most digital currencies, year-to-date (YTD), ADA-USD, is up over 740%. Put another way, the proverbial $1,000 invested in the crypto would now be worth around $8,400.
The altcoin’s 52-week range range has been 76.1 cents – $2.4618. At the recent price of $1.33, ADA sports a market capitalization (cap) of $42.6 billion, ranking it among the top five cryptos in the market.
By comparison, Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), the two largest cryptocurrencies, have appreciate 34% and 236%, respectively YTD. Their market caps are about $636.3 billion and $241.9 billion.
As ADA-USD is listed on prominent crypto exchanges, it enjoys significant liquidity and trading volume. Aside from Coinbase Global (NASDAQ:COIN), the digital coin is also heavily traded on Binance, Gate.io, and Kraken. Given the recent positive price momentum, crypto fans regard Cardano as the “Ethereum-killer.”
Therefore, investors now speculate whether the run-up in the price of Cardano can continue throughout the rest of the year. If you are a long-term crypto investor with a two- to three- year horizon, then you might want allocate some of your capital to ADA-USD. Let’s see why.
Digital assets are fast evolving. Yet, the world of cryptocurrencies is still mostly fragmented, where each digital asset does its own thing within its blockchain platform. Crypto analysts and researchers divide the history of these digital assets into three generations.
The first-generation starts with Bitcoin. The aim has been to create a decentralized peer-to-peer (P2P) digital currency.
In the second-generation, the focus is to use the blockchain technology “to facilitate the management of digital assets without enforcing platform ownership.” It is also the generation of altcoins that come after Bitcoin. Ethereum, which “offers new functionality through what are called smart contracts,” is the most important example of crypto in this generation.
Finally, third-generation currencies and platforms mainly aim to address the issues of scalability and interoperability. Scaling means increasing the capacity to handle large number of transactions at a time.
Interoperability means blockchain systems can communicate and share information with each other. Unless blockchain platforms achieve interoperability, the use of the technology will not reach its full potential in industries ranging from finance to healthcare, aviation, or logistics.
Cardano is a third-generation blockchain platform. Its native cryptocurrency, ADA-USD, is named after Ada Lovelace, a well-known mathematician often referred to as the world’s first computer programmer. Early investors in Cardano are also betting the altcoin will be one of the most successful names among third-generation cryptos.
Cardano’s network boasts a modular, layered protocol that runs on a proof-of-stake (PoS) consensus algorithm called Ouroboros. PoS only requires other ADA-USD holders to verify transactions.
Thus, the network operates more efficiently, and minimizes the carbon footprint of the digital coin. Many people hail Cardano as an eco-friendly “green coin.”
Cardano has seen a significant boost in adoption due to its new capability to build smart contracts within its network. As a result, Cardano will be able to host decentralized finance (DeFi) lending and staking apps, non-fungible token (NFT) marketplaces, decentralized exchanges, and oracles, which are “third-party services that provide smart contracts with external information.”
Ethereum has high fees and congestion issues, which Cardano can bypass. ADA-USD also promises to have a more robust smart contract environment compared to Ethereum’s DeFi platform. Given Ether’s hefty gas fees, analysts highlight that some of the $2 billion NFT buyers spent in the first quarter is poised to find its way toward Cardano.
However, Ethereum enjoys a substantial first-mover advantage against Cardano. Cardano’s platform may boast superior technical features, but it needs time to gain more real-world utility before it can catch up with its larger rival.
As long as the crypto bull market moves ahead, this energy-efficient altcoin is poised to remain a top crypto. The introduction of smart contracts should only push ADA-USD price higher.
Yet, Cardano is volatile, even in a bull market, and is exposed to occasional corrections at the very least. When Bitcoin plunges, there is not too much holding digital coins like Cardano from falling as well. If the crypto bull market were to pause, many investors would likely sell ADA-USD to lock in gains.
Interested investors should track Cardano’s performance closely to buy the dips. They should not hesitate to hold ADA-USD for the long term without worrying too much about market volatility.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.