This spring awakening is more than a breath of fresh air for crypto fans. It represents a key technical breakout of a long-term bullish pennant, as per the chartwork I cited Monday from our Senior Investment Analyst Luke Lango.
Source: Stanslavs / Shutterstock
“Long term” being the operative words there. And the implications for investors, writes Luke in The Daily 10X on Tuesday, are: “Assets that were crushed hardest over the past few months will win biggest over the next few months.”
We’re already seeing early signs of this turnaround. Since the broad crypto crash began in November, Solana (SOL-USD) and Cardano (ADA-USD) were among the hardest hit:
Source: YCharts
But when you zoom in to this week’s rally, the winners and losers have nearly reversed. Now, ADA and SOL are leading the pack:
Source: YCharts
But here at InvestorPlace, we’re long-term investors. This is how you win with crypto, as well as growth stocks: not by gambling, but by HODLing. So, let’s check how ADA and SOL are progressing in their long-term investment thesis.
Cardano (ADA-USD)
ADA has seen a nice run since March 21 but broke out especially sharply on the 23rd – four days before Bitcoin (BTC-USD) and Ethereum (ETH-USD) joined the party.
That day, Coinbase (NASDAQ:COIN) announced that it’s adding Cardano staking as an additional option for crypto income through its platform.
Cardano is already a popular choice for staking. Depending which route you can take, you’ll get around 4%-5% “cash back” by staking ADA. That’s a bit on the low side for crypto staking rewards…but a good 2X what you’d get from traditional stocks and bonds, even as interest rates make a significant jump
It also didn’t hurt ADA prices that Grayscale Investments announced a new “Ethereum killer” fund of smart-contract competitors – and Cardano is the #1 holding, with Solana a close second.
“Grayscale is by far the world’s largest digital asset manager with over $36 billion in assets under management as of March 22,” Cointelegraph reports. So, that’s a strong vote of confidence – and long-term catalyst – for ADA going forward.
Less talked about, though, is the broader institutional interest in Cardano.
When you look at Cardano transactions greater than $100,000, you’ll find that volume “has increased by 50x just in 2022,” IntoTheBlock tweeted Tuesday! These Cardano whales moved more than 69 billion ADA on Monday alone:
Source: IntoTheBlock via Twitter
And given that two investment firms have launched Cardano funds in the past month alone – namely, WisdomTree and CoinShares – that seems likely to continue.
Big institutional cash is a major factor in investing returns. It’s not everything, though; the fundamentals have to be there, too.
For Cardano and any other crypto, that means a thriving ecosystem of app developers finding real utility on the blockchain.
Cardano’s had a comparatively slow start there. Only seven decentralized apps (DApps) are up and running on Cardano at this time. The much-hyped decentralized exchange (DEX) launched in January, SundaeSwap (SUNDAE-USD), is one of the biggest with $105 million in total value locked (TVL) on Cardano.
That’s not to say, though, that the Cardano ecosystem is sparse or unpopular. Developers are flocking there. In fact, ever since Cardano launched in 2017, this technologically advanced blockchain has consistently been in the top three by developer activity count.
That lends some major credence to founder Charles Hoskinson’s boast that there will be “thousands of DApps” on Cardano. Currently there are 579 of them “in various stages of development,” Cointelegraph reported last week.
And Hoskinson argues that developers are simply holding out for Cardano’s planned “Vasil” hard fork, which will increase block sizes and transaction throughput on the network:
What most also don’t understand is that many Cardano DApps are waiting for the Vasil hardfork in June to launch to benefit from pipelining. So it seems we ain’t seen nothing yet on TVL https://t.co/mMHxwRrF96
— Charles Hoskinson (@IOHK_Charles) March 12, 2022
Already, the ability to mint your own native tokens, directly on Cardano (versus on a smart contract, as with Ethereum), has proved attractive.
“By existing on the base layer, native tokens are generally more efficient and secure than non-native tokens and adopt a majority of the features of the ADA coin, including governance features,” Kraken Intelligence explains in its excellent report on Cardano. More than 4 million of these native tokens have been minted on Cardano to date – just another example of Cardano’s rising popularity.
Solana (SOL-USD)
Like ADA, SOL has gotten a nice boost from being chosen for its own investment fund by CoinShares and WisdomTree, as well as the new Grayscale smart-contract fund.
Solana has also been aggressive about grabbing NFT market share from the O.G., Ethereum. And SOL surged to lead this week’s rally after OpenSea – the biggest (and formerly Ethereum-centric) NFT marketplace – tweeted that it will start supporting Solana NFTs in April:
The best kept secret in web3🤣 pic.twitter.com/xuZn64cZ4U
— OpenSea (@opensea) March 29, 2022
There’s another potential contributor to SOL’s sharp turnaround: Its leadership team, Solana Labs, announced partnerships with two new video-game studios just last week.
The creators of PlayerUnknown’s Battlegrounds (PUBG), a massive battle-royale game similar to Fortnite, signed a deal to develop Solana NFT games last Thursday. And last Tuesday, a newer startup, Block Tackle, raised a $5 million seed round from prominent VCs to create skateboarding NFT games on Solana.
Compared to earlier crypto pioneers, Solana operates a lot more like a traditional tech company. The approach is top-down, with heavy marketing and fundraising from VCs and a prominent founder: Anatoly Yakovenko.
This makes Solana divisive in the crypto community. “Bitcoin doesn’t do this, and neither does Ethereum. That’s because they are legitimately decentralized projects,” writes Crypto Briefing’s Christian Williams (whose main grievance is with Yuga Labs, of Bored Apes fame).
And yet… Solana is emerging as a popular choice for decentralized autonomous organizations (DAOs) – which, like NFTs, used to all be on Ethereum.
DAOs are an increasingly popular way to launch a startup, or any other Web3 community with a singular goal… kind of like a Subreddit with a bank account, on the blockchain. And Solana – whose fast, efficient transactions were designed with trading and finance in mind – is attracting DAOs in these areas, particularly.
DeepDAO, which ranks DAOs by membership activity, tokenholders, etc., shows that two Solana DAOs have emerged into its top five by treasury size. Number 4 is Mango DAO, which operates a DEX called Mango Markets, and #5 is UXDProtocol, which provides stablecoins on Solana.
Another thing SOL has going for it is that Solana appears to be the most environmentally friendly network. According to Solana, making a transaction there is one of the most energy-efficient things you can do in a day…while a transaction on Ethereum or Bitcoin – just one! – is perhaps the worst.
That’s a big deal as regulators home in on crypto. And it helps solidify Solana’s appeal as the cool, trendy crypto among celebrities. Most recently, Mila Kunis signed on as a co-producer of “The Gimmicks,” a new wrestling-themed comedy cartoon with an interactive community; fans can buy NFTs on Solana to participate in the show.
These deals with celebrities – as well as VCs and institutional investors – are likely to keep Solana’s name top of mind…far beyond this current crypto rally.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.
