Bitcoin (BTC 0.84%) was the first cryptocurrency and remains the largest name in the business more than a decade later. Cardano (ADA 1.00%) is a blockchain platform for smart contracts with an ambitious long-term road map.
Both of these digital coins soared in 2021 and crashed in the first half of 2022. Could their prices stabilize and restart their stalled growth trajectories this year? Let's take a closer look at Bitcoin and Cardano to find out.
The case for Bitcoin
As of June 15, Bitcoin's price has plunged 69% below November's all-time highs, landing at roughly $21,000 per coin. The largest cryptocurrency hasn't seen prices this low since December 2020. Bitcoin has generated market-beating returns over the last two years, despite the negative vibes in recent months:
Bitcoin Price data by YCharts
Generally speaking, Bitcoin's recent price drop has been tied to the same investor fears that weighed on Wall Street's growth stocks. Inflation is skyrocketing in America and around the world. The government is lifting interest rates to fight inflation, which is bad news for growth stocks and cryptocurrencies. People are looking to limit their exposure to financial risks these days, and that strategy includes stepping back from volatile investments.
On top of that market-wide trend, crypto investors have been spooked by the collapse of the stablecoin platform now known as Terra Classic, halted withdrawals from the Celsius Network crypto-based savings service, and other worries unique to the cryptocurrency market. Each one of these concerns tends to drag Bitcoin down again, even if the news didn't have any direct links to this specific digital coin. The captain is supposed to go down with the ship, you know.
There are brighter days ahead -- maybe not right away but in the long run.
This bear market will end, as every economic crisis eventually does. Meanwhile, domestic and foreign regulators are hammering out legal frameworks and taxation systems for these newfangled digital assets, and even an overly draconian set of regulations will be better than the unclear guidance that exists today. The beaten-down crypto sector will make a comeback.
Bitcoin's function as a simple payment system and ultra secure system for storage of economic value is crucial to the future of decentralized finance, Web3, and the metaverse. There are other cryptocurrencies that serve a similar function, often started as direct clones of Bitcoin's program code, but none can match Bitcoin's massive market footprint.
Any system or service that needs to manage financial transactions will almost inevitably support Bitcoin, usually as the first-choice default. And every new Bitcoin-powered product adds to the digital currency's market power. This is a situation where having the first-mover advantage gives Bitcoin a powerful edge in the long run.
Bitcoin's rebound may not start until Washington (and Beijing, and Tokyo, and Berlin, and...) put the final signature on their detailed cryptocurrency regulations. But when they do, you don't want to be left on the sidelines.
CRYPTO: BTC
Key Data Points
The case for Cardano
The smart contracts platform's future may be even more thrilling than Bitcoin's.
Cardano is compatible with smart contracts developed for the market-leading Ethereum platform, even though this system wasn't built to meet the ERC20 token standard from the start. The functionality was added in a later code upgrade, managed by a plug-in blockchain called Milkomedia that also adds cross-chain functions similar to the Polkadot ecosystem.
The powerful Milkomedia addition highlights Cardano's flexible blockchain network. Over time, I expect this development platform to continue gaining new features while staying on the forefront of blockchain innovation. Cardano already supports decentralized lending and borrowing functions, yield farming protocols, non-fungible tokens (NFTs), and much more.
If Bitcoin provides the capital of the future, Cardano is poised to deliver a lot of the functionality of decentralized banking and transaction services. This coin is not trying to kill or replace Ethereum, which looks likely to remain the overall market leader for smart contracts. Instead, Cardano gives app developers access to unique elements and features along with high-speed processing of transactions and smart contracts.
And don't forget that Ethereum's total market value is $130 billion today versus Cardano's $16 billion. Cardano can double Ethereum's long-term returns even if it grabs just 20% of the larger cryptocurrency's market share.
CRYPTO: ADA
Key Data Points
Who's the big winner?
There are no losers in this race. Cardano appeals to a different type of investor than Bitcoin, offering larger potential returns in a more competitive subsector. If I have to pick just one winner, it comes down to this fact: Bitcoin is the closest thing to a guaranteed winner in this explosive market. Long-term investors should build the crypto-focused corner of their portfolios around Bitcoin, leaving a smaller space for the more exciting but less predictable Cardano coin.
