Is the investment thesis with Polygon (CRYPTO: MATIC), Chainlink (CRYPTO: LINK), and Compound (CRYPTO: COMP) blown, or are these three laggards consolidating and waiting for another explosive surge? Fool.com contributors Chris MacDonald and Jon Quast took on this discussion during the Jan. 19 episode of "The Crypto Show" on Backstage Pass.
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Jon Quast: Let's turn now to the laggards. These cryptocurrencies that aren't doing quite as hot. Polygon, for example, down 10%, Chainlink down 13%, Compound down 7%. These are not quite as big as the three that we just touched on, so by my count here we have the 13th, the 21st, and the 85th largest cryptocurrencies by market cap according to coinmarketcap.com. These are a little bit smaller than the previous three. But yeah, there's winners and losers here.
Chris MacDonald: Yeah, and I think when you look at the crypto sector from maybe a high level, it's a good thing when your larger-cap tokens are up and maybe your smaller ones are down.
For Polygon, it was an interesting week. There's a piece of news that came out yesterday, I believe, that [Polygon] implemented the Ethereum (CRYPTO: ETH) Improvement Proposal 1559, which is otherwise known as the London Hard Fork. They're doing that in a bid to lower their fees. Investors, it seems, have on their radar right now the fee structure of a lot of these platforms. As a scaling solution for Ethereum, Polygon is really tied to the Ethereum rhetoric, I suppose, in terms of what Ethereum is doing. In that sense, it's been an interesting week in terms of updates, and maybe there's a little bit of uncertainty with that. Polygon is one that's down 10%. Like we mentioned at the beginning of the show, that's maybe par for the course in terms of volatility for these tokens.
Chainlink, we're going to talk about a couple of other interoperability networks as well today. It looks like some investor eyes are on other interoperability plays, Chainlink is an interesting oracle network that allows for outside data feeds to be integrated with the blockchain. It looks to me that this space is becoming more competitive so we're going to look at some Chainlink competitors and see how Chainlink is shaping up compared to those other peers.
Compound is one we mentioned on last week's show. It's a DeFi platform that allows for investors to earn passive income in the crypto space. This is another competitive space as well. Compound is down 7%, but really in the grand scheme of things, that's not necessarily too bad compared to a lot of other tokens that have underperformed even worse this past week. But Compound I know is down quite a bit from its high so this is one that investors who have been in it for a while may be losing interest with.
Quast: Yeah. It's definitely tough psychologically when something that you have invested in is down, and the longer that goes on, the longer that your investment is down. It's not a helpless situation, but sometimes you feel helpless and you begin to evaluate whether or not you even want to stay the course.
Of course, as long-term investors in stocks and also in cryptocurrencies, we're always about going back and evaluating the thesis and making sure that the underlying fundamentals are there. I'm not necessarily saying that with any of these here. I'm just saying in general, when our positions are down, when our investments are down, it's really important to make sure that we're checking our original investing thesis and tempering our psychology with that.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.