This Crypto Has Gained Almost 7,000% in 2021. Should You Buy?

Find out why Fantom has posted significant gains this year.

Smart contract cryptocurrency Fantom (FTM) has gained almost 7,000% since the start of this year -- even more than the popular crypto Dogecoin (DOGE). Fantom reached an all-time high of $1.93 on Sept. 9, according to CoinMarketCap data. At that point, if you'd have bought $1,000 of Fantom on January 1, it would have been worth almost $100,000.

Even after this week's drop, Fantom's price is still up over 350% since the start of August alone as investors pile into various Ethereum (ETH) alternatives.

What's behind Fantom's gains

Here are two key drivers behind Fantom's dramatic growth.

1. Smart contracts

Fantom is one of several cryptocurrencies with smart contract capabilities. Smart contracts are tiny pieces of self-executing code that live on the blockchain and allow it to run programs and applications.

Smart contracts are crucial for the burgeoning decentralized finance (DeFi) industry. DeFi is an umbrella term for a number of applications that take the middleman (banks) out of financial transactions. And smart contracts are the not-so-secret sauce in DeFi.

They can be programmed to execute automatically when certain conditions are met -- for example, an insurance policy might pay out without anyone needing to make a claim. Or a loan might pay back the collateral automatically as soon as the loan balance is paid off.

Non-fungible tokens (NFTs) are another booming trend fueled by smart contracts. Authorship, ownership, and copyright information is embedded into these digital collectibles. From cute CryptoKitties and Degenerate Apes to million dollar works of art and sports trading cards, NFTs are taking the world by storm.

First-mover Ethereum is still the biggest smart contract crypto by a long way. But it is comparatively slow and struggles with network congestion and high fees. As a result, a number of newer, faster, cheaper cryptos like Fantom are vying for market share.

2. Fireblocks and other partnerships

Fantom has made several big announcements this year -- most recently, a partnership with international digital assets platform Fireblocks. Fireblocks serves over 200 financial institutions and secures over $400 billion in digital assets.

Coinbase wallet listed FTM this month, though the token isn't available on the Coinbase exchange. FTM is available from several top cryptocurrency exchanges.

It also partners with several big crypto projects like Chainlink (LINK) and The Graph (GRT). Plus, it has real-world projects running in Pakistan, Tajikistan, and Afghanistan.

Should you buy?

Cryptocurrency prices are notoriously volatile and difficult to predict, and it is always risky to buy a coin right after it hits an all-time high, as Fantom did last week.

There are various trading strategies you can employ to balance out that risk -- for example, buying a smaller amount at a set time each week or month rather than one big amount in one go.

Ultimately, the best way to protect yourself against volatility is to only invest money you can afford to lose, and to buy for the long term. Base your investment decision on how you think the coin is going to perform in the next five to 10 years. That way, if it suddenly drops in value, you can wait out the dip.

Research the coin's fundamentals -- from its management team to its roadmap for the future. Read Fantom's whitepaper and compare it to other digital currencies in the same space. Our recent article on Fantom would be a good place to start.

There are many things in the world of crypto that we can't predict, which makes it all the more important to be diligent with the things we can control.

Threats to Fantom's price

As you can see from above, Fantom is a strong cryptocurrency project with a lot of potential. However, here are some factors that could knock FTM sideways:

• DeFi regulation: We're seeing an increase in crypto regulation around the world, and U.S. authorities are particularly concerned about DeFi. The worry is that these products are offering bank-like services without the protections a bank would offer. As a result, we'll almost certainly see some kind of DeFri crackdown in the future. This could have a knock-on effect on smart contract platforms.
• Its projects in Afghanistan: Several of Fantom's real-world projects are based in Afghanistan, which is now back under Taliban control. It isn't clear what impact the disruption will have on Fantom's work there, but it's fair to assume there will be some changes.
• Technical hitches: Fantom's technology is different from other blockchains in that its model allows transactions to be processed simultaneously. As the project grows and attracts new users, we'll get a better idea of how well it can scale.
• Wider crypto market: The crypto industry as a whole has made some big jumps this month, leading some analysts to warn of an impending drop similar to the one we saw in May. As the largest and oldest cryptocurrency, Bitcoin (BTC) tends to have an outsized influence on the rest of the market -- which could also affect a smaller coin like Fantom.

Overall, there are solid reasons for Fantom's growth this year, but it is still an incredible jump in price. The token may still grow further in the long term, but if you buy hoping for another 7,000% rise, you'll likely be disappointed.