Despite the recent bull market rally, many top cryptos are still trading at a hefty discount to their all-time highs. Bitcoin, for example, is still trading at a 45% discount to its all-time high of $68,790. And Ethereum (ETH +3.17%) is still trading 59% below its all-time high of $4,891.
Dig a little bit deeper, and you can find billion-dollar cryptos trading anywhere from 70% to 90% below their all-time highs. Two that particularly stand out for me are Cardano (ADA +2.26%) and Avalanche (AVAX +3.11%). Both have market capitalizations north of $7.5 billion, both are former crypto darlings that are now trading at more than 85% discounts, and both have long-term growth catalysts in place. In short, they're both crypto tokens ready to pop.
1. Cardano
Cardano, which is trading 87% below its all-time high of $3.10, is a Layer 1 blockchain, similar to Ethereum. In fact, the founder of Cardano (Charles Hoskinson) is one of the founders of Ethereum. As a result, it offers the same core functionality and utility as Ethereum, including non-fungible tokens (NFTs), decentralized finance (DeFi), Web3, and gaming.
That's why it's so puzzling that Ethereum, with a market cap of $242 billion, is worth nearly 20 times the value of Cardano, which has a market cap of just $13 billion. You can think of this from two different angles. From one perspective, investors have given up on Cardano ever surpassing Ethereum. From the other perspective, Cardano is a hidden gem that investors have somehow overlooked.
Image source: Getty Images.
I'm in the second group. There's a lot to like about Cardano, including its phenomenal success in DeFi this year.
This was an area where Cardano had badly lagged other rivals, including Ethereum. But if you look at current total-value-locked (TVL) figures for Cardano, the picture seems to have vastly improved. Cardano now ranks 12th among all blockchains.
Cardano's TVL (which is a useful way of measuring how much activity is taking place on a blockchain) has been pushing to new all-time highs this year. Over the past 10 months, Cardano has had success in several areas of DeFi, including the launch of new stablecoins and decentralized exchanges. All of this suggests that more growth could be on the way.
2. Avalanche
Avalanche is another Layer 1 blockchain that could be significantly undervalued. It currently trades around $20, still 86% below its all-time high of $146. Moreover, in terms of market cap, Ethereum is still 30 times more valuable than Avalanche.
The good news is that there's reason to think that Avalanche will eventually narrow this gap. During the last bull market rally, Avalanche was widely considered to be an "Ethereum killer." Investors viewed it as one of a handful of blockchains ready to challenge Ethereum, primarily due to superior performance in terms of speed, efficiency, and costs.
CRYPTO: AVAX
Key Data Points
Right now, investors are willing to pay a premium for any blockchain capable of taking on Ethereum. Another potential "Ethereum killer" -- Solana -- is up nearly 450% for the year. If Avalanche starts to trade more like Solana, then it could really pop. While Avalanche is up 89% for the year, it's only recently that it has started to heat up.
Taking a long-term view, what has me particularly intrigued is a partnership that Avalanche signed with the cloud computing unit of Amazon in January. At the time, the vision was for Avalanche to offer blockchain services to large enterprise and government clients, much like Amazon Web Services (AWS) offers cloud computing services to large enterprise and government clients.
Can any blockchain ever overtake Ethereum?
If you are thinking about investing in Cardano and Avalanche, just ask yourself a simple question: Do you think any blockchain can ever supplant Ethereum as the world's preeminent Layer 1 blockchain?
If you think the answer is no, then there's no need for further due diligence. But if you think that, yes, there is a chance some other blockchain will eventually surpass Ethereum, then it's worth taking a deeper dive into the prospects of Cardano and Avalanche.
As Cardano and Avalanche chip away at the market dominance of Ethereum, they should become more valuable. And, as a result, the vast chasm that separates them from Ethereum in terms of market cap should continue to narrow.
If that's the case, then investing in them now, when they're still bargain-priced, could end up being a fantastic long-term investment strategy.
