Cryptocurrencies

A Young Crypto With Big Potential

cryptocurrency

Long-term, regular readers of my musings will know that I was an early, enthusiastic supporter of Bitcoin (BTC). Far from seeing it as some kind of con trick or Ponzi scheme as some prominent bankers and pundits did when BTC/USD was at around $250, I recognized the potential real-world applications of not just Bitcoin but, more importantly, the blockchain concept as a whole.

Recently, however, I have gone somewhat quiet on the subject. Once the whole world knew what Bitcoin was and where its potential lie, and after BTC/USD jumped to around $50,000, there was no room for evangelicals such as myself. There are only so many times you can say “I told you so” to the early doubters, many of whom now talk about Bitcoin as if they had always been bullish.

Since those early days, of course, there have been countless other cryptos launched. Some that attempt to represent value only as a currency, face the problem of competing directly with the name recognition and acceptance of Bitcoin, but others that have focused more on the practical uses of blockchain technology have emerged and thrived. The most notable of those is Ethereum (ETH), and its token, ether.

If value is derived from name recognition and speculative value, as is the case now with Bitcoin and some other altcoins, there is little room for improvement on the basic concept, so challenging the established leader in the field is extremely difficult. When it comes to something like ether where the blockchain is used to facilitate transactions, on the other hand, there is always the danger that a better mousetrap will come along. In that case, the early adoption advantage of something like Bitcoin or Ethereum doesn’t apply. In fact, being a late entrant when the problems of the early entrants into the market are known has significant advantages.

That is why, right now, I am interested in Algorand.

Algorand has an impressive bloodline, having been developed in part by the MIT professor and Turing Prize winner Silvio Micali primarily as a platform to enable smart contracts. It has been around since 2019 and solves some of the problems that have become apparent with Ethereum and to some extent with Bitcoin. Transaction costs and costs of entry are lower with Algorand than with Ethereum, and the use of “pure-proof-of-stake” rather than Bitcoin’s “proof of work” means that it requires less computing power and therefore less energy consumption that the granddaddy of cryptos.

As you might expect with a nascent crypto, ALGO, the token associated with Algorand, has shown a lot of volatility since its launch.

algo

It is currently trading not far off its all-time highs, but as early investors in Bitcoin will tell you, new highs at low absolute values for a crypto aren’t necessarily a reason to hold off. I am not saying it will happen, of course, but there is a chance that Algorand could emerge as the dominant platform for decentralized finance, known as “DeFi”, and if that were to happen, ALGO would take off. Obviously, there is also the chance that another, even better mousetrap will be built before that happens, in which case $1.88 will look mighty expensive before too long.

That is the risk/reward calculation that always has to be made with cryptos. The potential rewards are huge, but the risk is basically a complete and total loss of your investment, something that is rare in most other assets. It is, therefore, not for the timid, nor should any one investment represent more than a small percentage of your investable funds.

That said, though, the blockchain concept is here to stay and, at some point, a platform will emerge as the leader in the smart contract and DeFi spaces. As it stands, there is a decent chance that will be Algorand, so, providing you are aware of and comfortable with the risk involved, it is definitely a crypto to consider.

*Disclaimer: As you might have guessed if you read the above, I have a long position in ALGO.

*Do you want more Articles and analysis like this? If you are familiar with Martin’s work, you will know that he brings a unique perspective to markets and actionable ideas based on that perspective. In addition to writing here, Martin also writes a free newsletter with in-depth analysis and trade ideas focused on just one, long-time underperforming sector that is bouncing fast. To find out more and sign up for the free newsletter, just click here

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

Read Martin's Bio