Fantom (FTM -6.60%) was a rarity in the crypto markets during the past month, rising while Bitcoin, Ethereum, and most other major cryptocurrencies sold off and fell deep into correction territory. So why has Fantom been able to buck the trend and can it continue to outperform? I am bullish on Fantom and believe it is worthy of a place in the portfolios of crypto investors looking for new assets in 2022.
Follow the total value locked
The old adage "follow the money" might as well be "follow the total value locked" when it comes to decentralized finance (DeFi) assets. Total value locked, or TVL, is a measure of the value of all assets locked in, or committed to, a DeFi platform like Fantom. The more value locked in a network, the healthier the network is and the more value investors see in it. Fantom's TVL surged from just under $4 billion on Dec. 22, 2021, to more than $11 billion at the time of writing.
Investors can take a look at the total value locked in a platform and divide it by the coin's market capitalization to get a feel for whether the asset is undervalued or overvalued. Dividing the market cap by the total value locked gives you a number that is similar to calculating the price-to-book value of a traditional company like a bank.
In traditional finance, book value is basically the value of the company if it were liquidated, so investors look at price-to-book value as a gauge to measure valuation. Fantom's current TVL of almost $11 billion versus its market cap of $5.86 billion gives it a value of about 0.5.
For the sake of comparison, Ethereum has a TVL of $120 billion versus a market cap of $300 billion, equating to a "price-to-book value" of 2.5 . Similarly, other major layer-1 cryptos like Avalanche (1.8), Terra (1.6), and Solana (3.9) all have valuations that are higher than Fantom's, suggesting that it is undervalued compared to these coins.
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Surging use
The use of Fantom has soared during the past year. In January 2021, there were only 5,000 unique Fantom wallet addresses. By the end of 2021 there were more than 1.5 million. Last January, Fantom processed about 4,000 transactions per day. As of last month, this number had increased 18,650% to 750,000 transactions per day. Adoption and use of the Fantom blockchain is surging as it has evolved from an obscure coin to a vibrant ecosystem.
Fantom's ecosystem is growing
A spate of new applications have been built on the Fantom platform. The advent of decentralized applications (dApps) helped turn Ethereum into the $300 billion asset it is today, as developers and artists flocked to its ecosystem and added excitement and value. We could be in the beginning stages of that with Fantom. Applications on Fantom include decentralized investment platform Beethoven X, decentralized exchange SpookySwap, and stablecoin platform Tomb Finance.
Looking ahead
Fantom has stood out from the crowd and outperformed the other major cryptocurrencies during the past month, holding up reasonably well during a major crypto drawdown over the past week, and I believe it will continue to do so. Fantom looks undervalued when comparing total value locked to market cap. As more investors discover Fantom and this valuation, investor interest should increase, especially as crypto investors are always on the lookout for the next Solana or Avalanche. Surging usage and a thriving ecosystem of applications show Fantom is here to stay. I think that it will be one of the key crypto winners of 2022.
