There are bargains to be had in the cryptocurrency market. Most digital currencies are trading well below last year's highs, and you can find bargains if you believe in the future of the next-gen denominations the way that I do.
I won't get into the largest tokens that you might already know all too well these days. I see a lot of turnaround potential in Terra (LUNC 12.20%), Fantom (FTM 6.50%), and Polygon (MATIC 0.14%), three promising cryptocurrencies that recently were down 48%, 44%, and 43%, respectively, from their previous peaks. They would have to nearly double to get back to their all-time highs. Let's see why that could happen.
Terra's appeal is how it works in conjunction with the TerraUSD (USTC -3.04%) stablecoin project. Terra is the native token of the smart-contract-propelled TerraUSD and other country-specific stablecoins. Let's start with TerraUSD, the stablecoin that may seem boring to most crypto investors since it tries to trade as close to the $1 mark as possible. Risk-tolerant income investors see TerraUSD differently, as they can earn almost 20% in annualized interest if staked through the Anchor savings and lending protocol that was introduced by Terra last year.
Now let's pivot back to Terra. The popularity of TerraUSD as a high-yielding stablecoin is great news for the more volatile Terra. As demand grows for TerraUSD, it results in Terra needing to be burned or retired in the swap for TerraUSD from the community pool. Terra is now the second-most-popular crypto on decentralized finance (DeFi) apps, trailing only market darling Ethereum (ETH 0.55%). It's currently clocking in with $14.2 billion in total value locked (TVL), the sum of all assets deposited in these next-gen applications.
Developers of DeFi apps have taken a shine to Fantom. Its ease of use and flexibility (as well as its lightning-quick ability to validate transactions) have made it a rising star for a surprisingly small digital currency with a $4.9 billion market cap. Fantom's sponsoring organization is also helping make its own luck by encouraging its use, setting up an assistance fund for Fantom-fueled apps with at least $5 million in TVL.
The amount of DeFi assets on Fantom-based applications has taken a hit the past two weeks, but it still had $8.2 billion in TVL as of Monday morning. Among the 15 largest DeFi protocol chains, Fantom is the only one that has a lower market cap than its TVL. It's the equivalent of a value stock in the crypto world, but the caveat here is that the assets can't keep sliding the way they have this month.
Finally, we have Polygon, a layer-2 network that is playing an important role in helping scale Ethereum. There are shortcomings to Ethereum. Until it completes its migration to a proof-of-stake model, it's slow and expensive to move around. The Polygon Network is a sidechain, a scaling solution to make the smart-contract pioneer more efficient.
The obvious bearish argument is that Polygon might take a hit once the Ethereum transformation to the more eco-friendly proof of stake is complete, but most crypto pros think that layer-2 networks like Polygon will continue to offer advantages over Ethereum itself.
With Polygon joining Terra and Fantom as cryptocurrencies trading more than 40% below their earlier highs, there's serious upside to all three if the market bounces back.