For almost all investment assets, risk and growth should be in healthy proportion to one another. If you are willing to take more than the usual risk, you should also be rewarded with more than the usual return potential.
That’s why the risk associated with crypto tokens is justified, and that’s why two-times growth in less than a year, which would seem remarkable in more conventional assets, looks rather weak in association with crypto assets.
However, what many investors need to understand is that the days when crypto was considered a “niche” investment and most cryptocurrencies were trading for rock-bottom prices are over. Even at their worst, few cryptocurrencies (if any) have fallen to their 2020 levels. So it might be a smart idea to start adjusting the growth expectations to more realistic levels (like two-times growth) and take advantage of cryptoâs rapid growth potential.
Image source: Getty Images
A âDeFiâ crypto
Terra (CRYPTO: LUNA) is technically the name of the blockchain that is able to host multiple stable coins (cryptos whose price is pegged to a different asset), and LUNA is its native token. This crypto is closer to Ethereum than Bitcoin, thanks to its decentralized finance (DeFi) applications. The concept behind it is that everyone with an internet connection can send, receive, and even borrow funds.
Like most other cryptos, LUNA reached its peak in late-2021, and it has been going down ever since. Its price grew to over US$100 when it peaked and at its worst fell more than 50% from the peak. It has started to recover from that point, and even if thatâs the turning point and you buy now, you may be able to double your capital in this cryptocurrency.
However, if itâs just a temporary reprieve and the crypto is set to fall down more, you may be able to achieve more pronounced growth by buying the full dip.
A secondary scaling solution
Where Terra is a blockchain comparable to Ethereum, Polygon (CRYPTO:MATIC) is a “sidechain” on Ethereum. MATIC is the native cryptocurrency of Polygon. Thanks to its popularity and its smart contract, Ethereum is used for a wide variety of things. But too much activity taking place and assets and money changing hands over Ethereum has made transaction âverificationsâ quite expensive on Ethereum, and it changes over time.
One solution to this problem is Polygon, which is a sidechain – a blockchain network layered over an original, larger blockchain network. Thatâs what Polygon is to Ethereum, but much faster and cheaper than the underlying one.
Despite this correlation, Polygon’s value doesn’t exactly mimic Ethereum’s, but it will grow if the underlying crypto grows. At its current price, it wouldnât have much difficulty growing your capital by two times if it reached its previous peak.
Foolish takeaway
Whether you are investing in crypto assets directly or tech stocks tied directly to cryptocurrencies, now would be a good time. Most cryptos are currently discounted, and tech stocks are discounted in general. The twin factor, especially if the slump stretches for a few more weeks, will make many otherwise expensive/overpriced assets very attractive investments.
