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The Motley Fool: Why It Makes Sense to Purchase Cardano Now

Cryptocurrency supporters will certainly want to turn the page on 2022, as last year saw the entire asset class shed roughly 64% of its value due in large part to strong risk-off sentiment among investors. Among the main drivers of that sentiment were the interest rate hikes the Federal Reserve implemented to fight inflation. Adding fuel to the fire was a string of high-profile blow-ups by crypto firms that shattered the public's trust in the asset class. 

However, there are still some cryptocurrencies that might be worthy of your investment dollars, especially if you take a long-term mindset. Here's why Cardano (ADA -2.09%), which ended 2022 down a whopping 82%, is one digital asset that warrants a closer look. 

Overview of Cardano 

Cardano is a blockchain network that operates under a proof-of-stake consensus mechanism, like Ethereum (CRYPTO: ETH) now does after "The Merge." This system allows token owners to lock up, or stake, their holdings in order to help validate new transactions on the blockchain. It's meant to be far more environmentally friendly than a proof-of-work system. 

Cardano's exciting layer-2 scaling solution, known as Hydra, will theoretically be able to process 1 million transactions per second (TPS), astronomically higher than Bitcoin's (CRYPTO: BTC) 3 TPS and Ethereum's 13 TPS. 

Another standout feature of Cardano is its slow and steady development approach. Using a team of scientists and researchers from various universities across the globe, Cardano is known for its phased upgrade process. Supporters view this as a valuable feature, as it ensures all scenarios are thought through and nothing is missed. This contrasts starkly with the "go fast and break things" philosophy of most crypto projects. 

Recent developments 

In September, Cardano completed an upgrade called the Vasil hard fork, which was meant to improve scalability and pave the way for the development of decentralized applications. According to analytics service Santiment, Cardano ended 2022 as the network with the highest developer activity occurring on it, overtaking Ethereum. 

Additionally, Cardano plans to launch its own stablecoin, called the Djed, this month. That stablecoin will boost Cardano's ability to become a more important player in the world of decentralized finance protocols, an area many still argue is crypto's most compelling use case. 

On Cardano's official website, it also mentions real enterprise-level solutions the technology can offer. For example, Cardano can be used by financial services firms to improve the processes by which they onboard clients. Additionally, it can be used to track parts of a supply chain for agriculture companies. These developments are still in their early stages, but the fact that this cryptocurrency is focusing on real-world applications is promising. 

Better entry price 

Since its public launch in 2017, Cardano has generated a superb return of almost 1,000%, easily crushing the returns of the two most valuable cryptocurrencies, Bitcoin and Ethereum, over that period. However, Cardano is down 91% from its all-time high to a market cap of just $9.5 billion. 

Besides being an innovative blockchain project, Cardano has some catalysts on the horizon, namely increased developer activity, that could catapult its price higher. Investors who purchase its tokens now have the advantage of buying in at a much lower entry point, which increases their potential upside. 

Don't bet the farm on Cardano. But if you understand the risks involved and have a time horizon of at least five years, then it makes complete sense to allocate 1% of your overall portfolio to the token. 

Neil Patel has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Cardano, and Ethereum. The Motley Fool has a disclosure policy.


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