- Various market-related headwinds have conspired with token-related concerns to provide attractive opportunities for long-term cryptocurrency investors.
- Cardano's troubles of late relating to delisting concerns and the pace of adoption by developers may prove to be short-lived.
- Security token cryptocurrency Tezos has tremendous upside long-term, despite market-related headwinds.
For investors looking for deals on top cryptocurrencies, this past week provided what may turn out to be an early Black Friday sale. The majority of large-cap cryptocurrencies have taken a hit of late, outside of specific groups of digital assets, such as those tied to the metaverse, that cryptocurrency investors have latched on to.
Unfortunately, the cryptocurrency world appears to be taking on some of the characteristics of other asset classes. Whether that's good or bad, macroeconomic factors now play into the valuations of these digital assets, perhaps more than ever.
This week, one of the key catalysts that drove down valuations across most highly valued asset classes was the renomination of Jerome Powell as Federal Reserve Chairman. While the market appeared to initially view this renomination as positive, it has become clear that investors were pricing in some probability that a more dovish option would be chosen. This sell-off continued into Tuesday and Wednesday, with the Nasdaq and cryptocurrency markets under pressure.
Now, investors have certainly been rewarded with a "buy the dip" approach to risk assets over the past decade. For those looking to do just that, there are certainly some juicy discounts to jump on with top cryptocurrencies. Here are two great options to consider right now.
Currently the sixth-largest cryptocurrency by market capitalization, Cardano (CRYPTO:ADA) is one of the cryptocurrencies that's been under pressure of late. Since hitting an all-time high of $3.10 on Sept. 1, Cardano has lost more than 45% of its value.
Among the key reasons why investors like Cardano is this network's speed and scalability. Cardano can reportedly handle more than 250 transactions per second right now, compared to around 4.6 for Bitcoin (CRYPTO:BTC) and 15 to 20 for Ethereum (CRYPTO:ETH). These numbers are expected to rise over time, as the network continues to be updated. For a large-cap cryptocurrency network, Cardano is fast.
Additionally, Cardano's proof-of-stake protocol has been enticing for investors considering alternatives to Bitcoin and Ethereum. While Ethereum is moving toward the adoption of a proof-of-stake model, Cardano remains one of the largest proof-of-stake networks available to investors right now.
The recent declines we've seen in Cardano appear to be the result of two key factors.
First, the network has seen slower adoption among developers for decentralized finance (DeFi) apps. Cardano's recent Alonzo hard fork brought smart contract functionality to Cardano. Thus, this token got bid up earlier in August in advance of the Sept. 12 launch. However, a rather disappointing showing on this front has led to a corrective sell-off among investors.
Additionally, this week it was revealed that cryptocurrency exchange eToro will delist Cardano. Regulatory concerns were cited as the rationale for this decision, though few specifics were given. Accordingly, investors remain on edge with Cardano right now.
That said, for those taking the longer view on Cardano, these shorter-term headwinds could prove to be a great opportunity to buy it. As investors continue to look at proof-of-stake networks with smart contract capabilities and the potential for growth, there's a tangible thesis to own this top cryptocurrency right now -- especially at a generous discount to recent highs.
Tezos (CRYPTO:XTZ) is a cryptocurrency investors need to go a little further down the list to find. This is another token that has been beaten up by the market of late. Since hitting a high of $9.18 on Oct. 3, Tezos has lost approximately 45% of its value.
However, this cryptocurrency is one I remain bullish on, for various reasons.
Tezos is a leader in the security token space. By security tokens, I'm not referring to the security or integrity of the blockchain itself -- on that front, Tezos receives top marks, alongside most of the major digital assets on the market. Rather, Tezos' Layer 1 platform (a term referring to actual blockchains and their tokens) allows for the tokenization of securities that normally are traded off-blockchain. Think of the various financial products investors may buy on an exchange (stocks, bonds, etc.).
Essentially, Tezos provides functionality to allow for assets to be traded on the blockchain. By tokenizing various asset classes, investors can expand their range of investments on the blockchain in a secure and seamless fashion.
One of the attributes that make Tezos so enticing in the security token space is the fact that this blockchain is self-amending. Rather than using hard forks (such as the aforementioned Alonso hard fork Cardano recently implemented), Tezos' blockchain includes an on-chain mechanism to update, rather than requiring simultaneous updates from nodes on the network.
Unfortunately for investors in Tezos, it appears that heightened regulatory risks pertaining to the cryptocurrency sector continue to provide headwinds for networks engaging in tokenization. The Biden administration has recently moved to tax cryptocurrency more heavily. Various Securities and Exchange Commission investigations into whether several crypto-related assets are deemed "securities" under the law have plagued this sector for some time. And countries like China and India appear to remain inflexible with their stance on cryptocurrency right now.
However, those with a longer-term time horizon may want to think about a future where blockchain technology can truly make a difference in the world. In the DeFi space, Tezos provides a solid investment thesis as a leader in security tokens. This is one area I think could provide tremendous value in the years and decades to come. Accordingly, investors may want to keep their eye on these tokens at these discounted levels today.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Chris MacDonald owns shares of Ethereum and Tezos. The Motley Fool owns shares of and recommends Bitcoin, Ethereum, and Tezos. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.