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Is Avalanche Coin (AVAX) a Good Investment in 2021?

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Are you wondering if Avalanche Coin (AVAX) is a good investment in 2021? Since I’ve written about the project, I’m familiar and can answer with some authority. I’ve been staking my AVAX for solid 10% returns and reading about the technology. The project has raised a ton of money, and has a solid roadmap. I’m impressed with their technology, and the Avalanche Network has serious potential. This article isn’t financial advice, and I’m not a financial adviser.


TL;DR


Yes, AVAX is a good investment. There are a lot of factors that make an investment ‘good’, and Avalanche meets these criteria. If you’re looking to learn all about Avalanche and how it works, check out my full article on the coin.

Why Avalanche is currently undervalued


Smart contract cryptos like Polkadot, Ethereum, and Cardano all have market caps > $35 billion. Avalanche offers the same advantages as these cryptos, but has a market cap of less than $10 billion. There’s a lot more room to grow for Avalanche. For transaction speed and volume capability, Avalanche outperforms both Polkadot and Ethereum. Avalanche also offers staking rewards greater than those delivered by Cardano and Ethereum. Because Avalanche is a lesser-known top-20 crypto project, it hasn’t yet seen the investment other cryptos have. Other smart contract cryptocurrencies like DOT, ADA, and ETH have seen explosions in value. I have no reason to believe that Avalanche will be any different- its day is coming.

Avalanche Consensus Comparison
Classical consensus is old, tried and true- and slow. Nakamoto consensus- what Bitcoin uses- is decentralized and robust. Avalanche consensus uses probabilities to achieve transaction finality in < 2 seconds. It’s got some serious speed.

Time horizon is important


Are you here to get insane gains so you can buy a Lambo by year’s end? You’re in the wrong place. Since Avalanche is a cryptocurrency and cryptos are so volatile, there’s a fair chance you’ll lose money in the short term. For investors with short time horizons (< 3 years), Avalanche (or other cryptos) may not be a good idea. The key with crypto investing is to be patient and stoic. If you’re like me and you believe smart contracts are going to change the world and gain adoption, Avalanche is a must-have in your portfolio. Only the best crypto projects will survive the worst market downturns, and Avalanche is one of them.

Avalanche Team
Avalanche’s co-founders, including Emin Gun Sirer, a professor of computer science at Cornell.


AVAX tokenomics


A cryptocurrency can be an amazing project and still have tokenomics that are shitty for investors. For example, The Graph Token (GRT) has a great use case, but awards early investors in the project with huge coin releases which they immediately sell. This causes big decreases in the price for outside investors like us. Tokenomics are one of Bitcoin’s most attractive features, because there will only ever be 21 million Bitcoin. In order for us to see the price increases we want for our AVAX investment, we’d prefer it if the coin maintained relative scarcity. AVAX has a capped supply of 720 million tokens, of which 55% are currently already in circulation. New AVAX tokens enter the network at a rate of 7-12% per year, a conservative rate. Despite AVAX being inflationary, I see it’s potential growth more than offsetting the effects caused by new coin supply.


Staking with AVAX


If you have the money to buy at least 25 AVAX, you can stake your coins. Currently it takes about $1,500 to buy 25 AVAX. Because of this staking minimum, many AVAX investors can’t stake. But for the investors who can stake, the returns are greater, in the 9-10% range. This is currently double what I’m able to get from staking Cardano. Staking rewards only add to the incentive to buy and hold onto AVAX. If you’re earning 9-10% passively on a coin, you can restake your rewards. If you continue to do this and AVAX appreciates over time, you could be looking at some monumental returns. Very few assets in any financial space can offer the steady returns that staking offers.

Despite Avalanche token’s (AVAX) gains over the past year, the cryptocurrency still has a lot of room to grow.

What makes a ‘good’ investment?


For an investment to be a good one, it depends on who you are. How old are you? What’s your goal? What is your risk tolerance? Do you know how the project works and do you truly believe in it? Early in my crypto investing career I found I’m not able to tolerate as much risk as I’d previously thought. When the market suffered a big correction, I lost 80-90% of the value of some small cap coins I held. Mentally, it was too much for me. If you’re young (<30), then you’ve got plenty of time to recover from something like that. For me, the crypto space is way too volatile but I invest anyway because we will see global adoptions and huge growth. Avalanche delivers some insane transaction speeds, meshes with the Ethereum network, and will field smart contracts. I’ve always entered the crypto space with the mindset that I’m okay with losing whatever I invest. Avalanche isn’t as well funded as some other projects, and could capitulate should a huge market downturn come. Soon enough, the space will have enough adoption and market cap to be a lot safer. But the gains won’t be as great.

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