Over the past two months I have been investing in Cardano with the excess cash I have been making in the market. I hold Cardano over Bitcoin or even Ethereum for a couple main reasons.
This post was written when Cardano was priced at $1.20 a coin. Since then the price has exploded up to near $3.00 coin. I hope some of you guys got a chance to get in and catch some profit.
Bitcoin is not scalable. It will become the internet’s version of gold, meaning that there will be a finite supply. That being said, the use of Bitcoin is now almost zero as the transaction fees and time are too large for an average transaction.
Due to this limiting factor of Bitcoin we are seeing a decrease in financial viability and overall market cap of the coin itself. We can see this in the following image.
Top 5 crypto’s by market cap
Over the past month we have seen Bitcoins average market cap of 60% decrease to around 50%. This has happened before in the past but this time we are seeing a breakout of alt-coins that not only have taken market cap away but also have kept the market cap, a very unusual trend for this market.
As such, we need to begin to look at a new coin to invest into. I still hold Bitcoin but it’s becoming apparent that the next generation of Crypto needs to be scalable.
The biggest competitor to Bitcoin currently is Ethereum, and don’t get me wrong I hold Ethereum in my portfolio but it’s no Cardano. The reason behind this is that currently ETH’s gas fees are extremely high for a simple transaction which destroys its scalability currently. ETH 2.0 is supposed to fix this, but unfortunately the fork to this design keeps getting pushed back while Cardano is already there.
Second: Proof of Work vs. Proof of Stake
If you know me then you know that I have been a huge advocate of Proof of Stake over proof of work ever since I saw Dash Coins method. This still holds true and I think that all major currencies going forward are going to use a Proof of Stake methodology outside Bitcoin.
In essence Proof of Stake allows validators instead of miners to verify transactions. Each validator takes turns verifying the transaction, and those validators with larger holdings get more turns. This differs from mining because miners will compete with one another to mine a block where a validator will just wait their turn. Thus saving both energy and time.
Proof of stake is an incredibly alluring thing for investors. There is very little overhead and you can treat it like an income generating asset that compounds. Cardano for example compounds at around 5% per year.
Ethereum currently uses Proof of Work for a majority of its ecosystem. This is one of the reasons why the transaction fees are so high on ETH currently. Cardano on the other hand uses only Proof of Stake and already has a fully decentralized network doing this. I’m a firm believer that it is harder to move a large project such as Ethereum to Proof of Stake and as such I think that Cardano will continue to increase in market cap over the next coming months.
All Crypto’s have the same goal of becoming the universal currency and accountability platform for all peer to peer transactions to take place. How they go about doing this is a whole different argument.
Ethereum currently has an open source development platform. This means that anyone who thinks they can program and improve ETH can sign up to take a shot at it. This is a problem because the more minds you put into solving an issue the larger the issue becomes.
We can see this in all forms of government or offices; To many chiefs and not enough Indians. As a result development becomes stagnant or sometimes regressive if not enough precautions take place.
Cardano fixes this issue by creating wholly owned and operated development companies with clear goals and missions. This form of development fixes a major issue that plagues a majority of other Crypto’s and that is feasibility of goals and funding.
Forth: Investment Timeline
I have to be clear. Cardano for me is a 5-10 year investment. If development goals and timelines are hit then I expect Cardano to become a major player in the Crypto space around 2026 or 2027. If this is the case then not only me but many experts expect Cardano to be around $100 or $120 a coin. This could happen sooner if we see a massive increase in overall Crypto market cap after the next bull run.
I expect Cardano to have a market cap of around 5% by the end of 2022 if the project continues along the same route and hits their milestones. Until then don’t expect to become rich off Cardano overnight, its 35 billion coin circulation in theory will prevent any major runup but also consolidate the coin.
Conclusion and action
Every investment thesis needs to have a conclusion and action plan associated with it. This is no different.
I have been selling puts and making money off the market for a better part of 12 years. Normally I take out my profits and reinvest into dividend generating assets such as funds of funds or stable Reits (You let me down O). But due to the massive upside potential present in Cardano I have decided to reinvest nearly all of my new earnings into this income generating asset.
I plan on holding for the next 5 to 10 years assuming the Cardano team keeps on performing and hitting their goals. If I am correct in my thesis then by 2030 I can expect to have 100x my investment and be pulling in a sizable dividend, that is paid out weekly by the Cardano project.
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Here’s to hoping,