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Cardano Requires Patience, As Its Utility Increases So Should the Price

InvestorPlace - Stock Market News, Stock Advice & Trading Tips Despite the market's continued souring on it, keep an eye on Cardano, as it still stands to see gradual, but...

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This story originally appeared on InvestorPlace

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

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It may not have joined its larger peers, like Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD), in rallying last month. Yet that hasn’t stopped Cardano (CCC:ADA-USD) from pulling back, following the recent crypto run-up. Right now, it’s trading for around $1.77 per token. That is about 20% below what it traded for last week. Worse yet, its a substantial decline from the $3 per token it traded for following the Alonzo Hard Fork upgrades in September.

A concept coin for Cardano (ADA-USD).
Source: Shutterstock

It makes sense why Cardano’s selling off now. But why didn’t it rally in October and early November?

Chalk a lot of it up to rising competition from the other top “Ethereum killer,” candidate, Solana (CCC:SOL-USD). As I recently wrote, SOL-USD is starting to look more like the crypto that will give ETH a run for its money.

So, between its underwhelming performance, and with Solana now the new altcoin rising star, should you stay away? Not so fast.

Yes, for now, it may not be much of a great trading opportunity. It could stay stuck at current prices, or drift even lower, in the short-term.

However, when it comes to its long-term potential. Cardano still remains a viable play. In time, as more DeFi (decentralized finance) and dApp (decentralized app) developers flock to it, it will become more widely used. In turn, this will enable it to see a further, albeit gradual, rise in price. This doesn’t have to be the only crypto in your portfolio. Just don’t consider it one that you should pass up on.

The Near-Term May Stay Underwhelming for Cardano

ADA-USD’s long-term prospects remain bright.

Unfortunately, its middling performance recently could continue for some time. Even the post-Alonzo profit taking, which played a major role in its drop in early September, has likely wrapped up.

Why?

Mostly, because it’s going to take a while before Cardano has another bout of “game changing” news. Granted, there have been some developments of note over the past month. For example, as InvestorPlace’s Brenden Rearick reported Oct. 28, news of this token’s developer forming a partnership with the Government of Burundi. Cardano’s founder, Charles Hoskinson, has been traveling across Africa, looking to promote usage of it across the continent.

However, it’s going to take something more major, like the Hydra upgrades, to compel traders to dive back into ADA-USD. Once implemented, Hydra could help this crypto’s blockchain catch up to Solana in terms of scalability and speed capabilities.

Nevertheless, while the crowd stays on the fence, this may be your opportunity to enter or add to a position in this token. As the “pupcoin bubble” deflates, flash-in-the-pan plays like Shiba Inu (CCC:SHIB-USD) have started to collapse. However, in the case of this high-utility crypto, competition from Solana, not to mention the current “DeFi king” Ethereum, may run high. Even so, just remaining one of the most widely-used cryptos could enable it to see further price gains.

ADA-USD Still Stands to Rise in Price Over Time

The situation with Cardano hasn’t changed much in recent weeks. But neither has the long-term bull case. Just like I mentioned above, and in prior coverage of it, the long-term bull case is as follows.

Thanks to the Alonzo upgrades, this crypto has made a big leap toward bridging the utility gap between it and Ethereum. All that’s left now is for it to bridge the valuation gap between it and the more widely used crypto.

As this occurs, and more developers move their dApp/DeFi applications to the Cardano blockchain, its share of the blockchain finance market will climb. In turn, as it becomes as widely used, it should see its market capitalization (which stands at around $59 billion today) get closer to that of ETH-USD, which today has a market capitalization of $498.7 billion.

The best part?

As the gap between the two high-utility cryptos is so wide, even a partial catching up on Cardano’s part would result in a tremendous jump in price compared to where it stands today. I wouldn’t count on it happening as quickly as Cardano’s last triple-digit percentage move. But don’t think that, after its more than 10x increase in price so far in 2021, it has topped out quite yet.

The Bottom Line on Cardano

If you’re looking for a short-term crypto trade, for now you may want to stick to the names making headlines right now. As of this writing, Decentraland (CCC:MANA-USD) and “metaverse” themed cryptos are replacing “pupcoins” like Shiba in terms of what’s hot. But if you’re looking for a crypto you can approach as a long-term investment then ADA-USD remains such an opportunity.

Buying Cardano now, after it’s fallen back below $2 per token, could be a winning move in hindsight. In the coming years, as its usage increases, it stands to see a gradual, yet substantial, increase in price.

On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. 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.

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