Cardano (CCC:ADA-USD) has been called the “Ethereum Killer”. But what does this mean for the investors of tomorrow? Let’s take a look at blockchain technology and its ADA coin, then come up with a risk-adjusted determination aligned with those findings.
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Ethereum (CCC:ETH-USD) is the second largest blockchain by rating behind Bitcoin (CCC:BTC-USD) with a capitalization of nearly $ 250 billion. That shames about 95% of the large cap stocks in the S&P 500. And while it may be in second place by some measures, it is the best dog in the crypto market in other ways.
Ethereum’s utility proposition for today’s digital decentralized finance (DeFi) market is unmatched. Don’t take my word for it though. Smart billionaire street businessman Mark Cuban has credited ETH with the most powerful feature in cryptocurrency and smart contract technology, which will eventually eclipse the use of Bitcoin.
Support is nice to have. But in a disruptive but also ever-changing crypto market, what works today is no guarantee of future leadership, let alone survival. Enter Cardano and its ADA cryptocurrency.
The history and technology of Cardano
Created in 2017 by one of Ethereum’s co-founders, ADA obviously deserves some built-in consideration. Today, there are over 10,000 digital assets. And in addition to ETH, Bitcoin and the joke token called Dogecoin (CCC:DOGE-USD), most investors would have a hard time naming even one other cryptocurrency.
Given Cardano’s strong lineage in the second-largest crypto market technology, ADA should raise eyebrows as a new company created by that of Microsoft (NASDAQ :MSFT) Bill Gates could. And in fact, Cardano has proven itself. The platform’s open source proof of stake blockchain has gained critical mass for incredibly good reasons.
Cardano’s technology is faster and more energy efficient than its competitors. And whether this technology is used to guard against counterfeit retail products or allow farm businesses to track products from seed to your stomach, functionality matters.
The news is also improving for ADA investors. Cardano is currently testing an upgrade called Alonzo.
Cute name aside, the build will enable smart contract blockchain. Along with the existing scalability and financial advantages of Cardano over Ethereum, it also allows many Dapps (decentralized applications) to move to Cardano.
To be fair, Cardano isn’t the only potential Ethereum killer on the block. Polygon (CCC:MATIC-USD) is another top contender for this title. And Ethereum isn’t just resting on its laurels, either. A more robust version of the blockchain known as Ethereum 2.0 is being developed to address the network’s own shortcomings.
Cardano Monthly Price Table
Source: Charts by TradingView
It’s important to remember that this is a time of early technological innovation. Few of us have even used a digital asset for anything other than a commercial vehicle – spending money on certain tokens, waiting for the price to rise, and then selling at a profit. Therefore, we also need to take a serious look at the ADA price chart.
As with any crypto investment, ADA is meant to be smartly traded for short-term gains. The hope is that a smaller stake after taking partial profits could turn into a life-changing variety of investment. Today, a purchase to start this kind of campaign might be possible.
After May’s volatile correction from the token’s all-time high, ADA formed an indoor monthly candlestick. With June price action also taking the form of a bullish hammer formed out of the trend and 62% Fibonacci retracement levels and centered on the contract high before 2018, the anticipation of a bottom Significant has a decent looking backing that works in its favor.
I would not be an ADA buyer yet.
Today, and as the monthly view also reveals, the Stochastics have reversed lower due to an overbought situation. What I would demand from a buy is that ADA continue to hold above the 50% level and trend support. The secondary indicator should, at a minimum, do more than point down into neutral territory.
Ideally, a bullish cross with the ADA token that just crossed its old high would be the wishlist entry. So it’s a moose that is bought, rather a falling knife. But life is not perfect and in this type of situation I would settle for a flat if ADA finds its way above the previous high of 2018.
Bottom line, if these conditions were more or less met, then I would advise handling this investment as if it were the last $ 1.40 or so in your pocket, rather than just blindly encouraging trade and possibly leave the bag in hand.
As of the date of publication, Chris Tyler holds (directly or indirectly) positions in Grayscale Bitcoin and Ethereum Trusts (GBTC, ETCG and ETHE). The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Chris Tyler is a former ground-based derivatives market maker on the US and Pacific stock exchanges. For additional market information and related thoughts, follow Chris on Twitter @Options_CAT and StockTwits.