In this piece, I’ll talk about what Cardano looks like from a short and long term investment perspective. The TL;DR here is that yes, Cardano is a good investment. There are a lot of individual factors that make investments “good” for different people. We are different ages, we have different time horizons, different financial goals, different risk tolerances. One thing I’ve learned through my time in crypto is that my risk tolerance is actually far less than what I had previously thought- the pain of losing money is too great for me. Because of this, my portfolio is mainly made up of large caps (90%+ of my portfolio lies in Bitcoin, Ethereum, and Cardano) with a sprinkling of small cap projects I think are legit. Compared to meme coins and shit coins, Cardano is a fantastic investment. Cardano’s network has the potential to create immense economic value for the world.
Is Cardano a good investment?
Since the Cardano network provides a low-cost, high-efficiency platform for smart contracts, it’s hard to imagine a future without some explosive growth for Cardano. Since Cardano is a cryptocurrency, and most all other cryptocurrencies follow the price patterns of Bitcoin (at least for now), it is subject to the same violent swings as other cryptos. For investors whose primary consideration is steady returns, Cardano and cryptos in general should only make up a small percentage of their portfolio. For investors with short time horizons (< 1 year) Cardano may not be a good idea. However, if you’re bullish on crypto like me, and believe that it is grossly undervalued given its potential to change the world, and you have a longer investment time horizon (10+ years), Cardano is simply a must-have in your crypto portfolio.
Staking with Cardano
Since Cardano is a proof-of-stake network, you can earn rewards on your Cardano using online wallets or even by holding it in your cold storage wallet with Adalite (this is what I do). Staking is a fantastic risk-free way to earn more Cardano on top of your Cardano. Most staking rewards in ADA come out to 5-10% per year. Of important note here is that staking rewards are in ADA, not fiat currency, so if you earn rewards but the token goes down in value you’re still going to lose money. Still, when the expected growth of Cardano is paired with staking rewards, there’s a high probability that over time investors in ADA who stake will see outsize returns. The stock market has dividends- but crypto has staking!
Is Cardano more stable than other non-stablecoin cryptocurrencies?
The running joke with Cardano is that it’s a stablecoin- when the crypto market crashes, Cardano typically does well. This is great, since one of the most important things in all of investing is to never lose money. Imagine you had held $10,000 in crypto in early April 2021- after the crypto crash in May, your holdings would have suffered a 50% correction down to $5,000. Now you have to make 100% back on your investment just to get back to where you were in April. Check out the below chart from Fortune.com- you can see Cardano held up relatively well compared to other cryptos after the May crash.
Those who held a good deal of Cardano in their portfolio performed better than most through the crash. This goes back to the thesis that the only true things long-term that will raise the prices of cryptos are fundamentals- that is, the use case of the cryptocurrency and worldwide adoption. That’s why we’ve seen such big price dips when China bans Bitcoin mining or Tesla says it won’t accept Bitcoin- these are big signals that adoption is going to slow down.
What makes Cardano such a solid crypto project?
I did write an entire article about this if you’ve got the time. But I’ll give you a TL;DR-
- Charles Hoskinson. Most of the media narrative around crypto is that it’s funny money and/or a vehicle for illicit transactions. The famous co-founder of Ethereum is outspoken and happy to communicate the value, efficiency, and security that smart contracts can bring 1000x over.
- Solid business strategy. IOHK is bringing Cardano to places like Ethiopia with huge swaths of unbanked populations- fortune 500 companies will be eager to get on the Cardano network to gain access to these markets.
- Design that scales. With Cardano, there will be no need for a ‘Cardano 2.0’ like there is with Ethereum or Wrapped Bitcoin because it’s being built right the first time.
Personally I think the business strategy piece is very important. It’s wonderful to have a great technology that can execute efficient decentralized transactions- but if there’s no driving force behind the adoption of that technology, it very well may be history. Adoption of crypto has to be kinetic on all levels- conversations happening in boardrooms, in government offices, in investment circles, in computer laboratories at MIT and elsewhere. The legacy financial system is rooted deep- meaning switching costs to blockchain technology are going to be steep. Cardano has leadership and strategy to help bring the world a smart contract platform.
A final word about crypto investing
The digital asset class is still extremely small and volatile. Whether it’s FUD or government regulation (which could actually be good for crypto), there’s plenty out there that can still make blockchain technology bleed. My personal stance is to only invest into cryptocurrency what you’re able to lose- and when (not if) you make profits on your investments in crypto you withdraw your original principal investment. As the asset class grows and crypto gains adoption my stance on this will change. Since less than 2% of the world’s ~8 billion people own or transact in cryptocurrency, there is an untold amount of growth ahead.