With inflation running rampant worldwide, speculative assets like growth stocks and cryptocurrencies have lost favor with investors. The crypto market has fallen 40% since peaking in November, erasing over $1 trillion in wealth in a few short months. But that sort of thing has happened before, and it has always ended the same way: The market has rebounded and gone on to hit new highs.
With that in mind, the ongoing crypto market crash may actually be a long-awaited buying opportunity. While there are dozens of investable digital assets, Terra (LUNC -0.15%) and Fantom (FTM -2.58%) are backed by a compelling investment thesis -- they look cheap compared to rival cryptocurrencies.
Here's what you should know.
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1. Terra
The Terra blockchain features two different coins: Terra and Luna. The former is a stablecoin designed to track the price of fiat currencies -- for instance, TerraUSD mirrors the price of the U.S. dollar, while the latter absorbs volatility, keeping the price of each stablecoin at the desired level.
How does that work? Imagine that soaring demand for TerraUSD pushes its price to $1.02 (i.e., above the target price of $1). To correct that, the system allows users to burn $1 worth of Luna to mint one TerraUSD coin, meaning you can buy $1.02 for $1. You can then sell the TerraUSD coin for a small profit. And in doing so, you increase the supply of TerraUSD, which brings its price back down to $1. The system works the same in reverse.
Additionally, Terra is secured by the Tendermint protocol, a type of proof of stake (PoS) consensus mechanism designed for high throughput. To that end, the Terra blockchain can theoretically process 10,000 transactions per second (TPS) while finalizing those transactions in just two seconds. That scalability has supercharged its growth trajectory. Terra is the second-largest decentralized finance (DeFi) ecosystem behind Ethereum, with $22.7 billion invested on the blockchain.
While there are many interesting DeFi apps on Terra, the lending protocol Anchor is perhaps the most compelling, as it offers far better interest rates than a traditional average savings account. Right now, you could earn 19.6% APY by lending TerraUSD on Anchor. To that end, like many DeFi apps on Terra, Anchor creates demand for TerraUSD, which translates into demand for Luna. In other words, as more consumers adopt software and services like Anchor, the resultant demand for Luna should drive its price higher.
But why is it a screaming buy? Currently, Luna's market value sits at $30.1 billion, roughly 1.3 times the total value locked (TVL) in DeFi applications on the Terra blockchain. That ratio is much lower than Ethereum's 2.8 times TVL and Solana's 4.1 times TVL. In other words, Luna looks undervalued by comparison.
2. Fantom
The Fantom blockchain is powered by the FTM token. Its novel PoS consensus mechanism, known as Lachesis, makes the platform fast. The developer team believes Fantom is the fastest public blockchain in the crypto industry, citing its ability to handle thousands of transactions per second while finalizing transactions in just one second. That scalability also keeps fees low, as users typically pay a fraction of a cent per transaction.
Better yet, Fantom is compatible with the programming language used to build smart contracts on Ethereum, the world's largest ecosystem of decentralized applications (dApps) and DeFi products. That means developers can easily deploy their Ethereum-based projects on Fantom, exposing them to a larger audience. That compelling value proposition has made Fantom one of the fastest-growing blockchains in 2022.
Since January, the TVL in DeFi products on Fantom has jumped 50%, from $4.9 billion to $7.4 billion. Meanwhile, the TVL in DeFi products across all blockchains has contracted, falling nearly 20% since the beginning of the year. Currently, Fantom ranks as the fifth-largest DeFi ecosystem, but in light of its value proposition -- scalability for developers, and inexpensive transactions for consumers -- that figure is likely to rise in the future. As more consumers adopt software and services on the blockchain, demand for the FTM token should rise, driving its price upward.
But why is it a screaming buy? Currently, Fantom has a market value of $3.6 billion, which is roughly 0.5 times the TVL in DeFi products on the blockchain. Compared to rivals like Ethereum and Solana -- which trade at 2.8 times TVL and 4.1 times TVL, respectively -- Fantom looks significantly undervalued. That's why this cryptocurrency looks like a smart buy right now.
