What happened
Many cryptocurrencies are down sharply over the last 36 hours, but cryptocurrency Algorand (ALGO 4.02%) didn't get the memo. As of 1:15 p.m. EDT, Algorand tokens were up a whopping 43% over the past 24 hours, according to CoinMarketCap. The same source also now ranks Algorand as the 20th largest cryptocurrency in the world by market capitalization.
So what
There isn't a definitive catalyst for Algorand today but there is a correlated event that could explain the move. El Salvador made headlines yesterday when Bitcoin became legal tender alongside the U.S. dollar. However, while Bitcoin stole the headlines, Algorand was also busy at work in El Salvador behind the scenes.
Image source: Getty Images.
Koibanx is a company trying to push blockchain adoption in Latin America. After El Salvador voted to approve Bitcoin as legal tender, Koibanx approached the government about adopting additional blockchain solutions like property records -- remember, blockchain is just a database ledger. El Salvador agreed and Koibanx picked Algorand as the blockchain on which to build the country's infrastructure.
Now what
To be clear, El Salvador didn't deploy anything on the Algorand blockchain today that would cause a spike in the price of tokens. My theory with Algorand is that the El Salvador headlines are creating a buzz among the crypto trading community. According to CoinMarketCap, trading volume for Algorand is up around 250% over the past 24 hours. It's possible traders are simply chasing some short-term gains and believe they can find it in Algorand.
Whether it's crypto or stocks, the shorter your time horizon for investing, the greater the odds you're playing a "greater fool" game -- simply expecting to outsmart the next person who'll buy your asset for a higher price without good reason. That's a dangerous game, and one I fear many Algorand traders are playing today.
In my opinion, it's much better to buy Algorand based on its long-term potential rather than hoping to make a quick trade for a profit. El Salvador's experiment does hold promise for this particular blockchain. But it still has to show it's up to the task of digitizing legal documents in El Salvador before other countries would potentially jump on board.
