Zilliqa Is Up 20% Today: Should You Buy?

Zilliqa has seen significant gains in recent days, but can it sustain them?

Zilliqa (ZIL) is a smart contract crypto that caught investors' attention in March prior to the launch of its Metapolis metaverse. It gained over 400% in a month when other cryptos were struggling to get any momentum. However, Zilliqa couldn't sustain those gains. It fell almost 60% in April.

ZIL has increased by 20% in the past 24 hours and over 40% in the past few days, but even then it is still a long way off its recent peak. In fairness, economic and geopolitical factors have pushed many crypto prices down. But we also often see this pattern around the latest "hot" coin or token. People buy because they're scared of missing out on the next big thing, and that can cause prices to rise to unsustainable levels.

What is Zilliqa?

Zilliqa is one of a number of programmable cryptos that offer an ecosystem for applications and cryptocurrencies. It has almost 200 projects on its network, including exchanges, wallets, gaming projects, NFT apps, and more. Zilliqa also boasts that it was the first blockchain to introduce sharding. Sharding is a way of splitting the load and making a network more sustainable that has since been adopted by several other projects.

Plus, Zilliqa recently launched its own Metapolis metaverse. The VIP launch took place at the start of April, but ordinary users can't enter it yet. Zilliqa says it is the first metaverse-as-a-service platform, and the idea is that brands can use the platform to build and maintain their own metaverse products. Zilliqa has already announced a partnership with global talent awards app Agora, as well as several esports companies.

Should you buy?

Zilliqa has an experienced team and is a relatively well-established cryptocurrency. It is available from some, but not all top U.S. cryptocurrency exchanges. For long-term investors, there are several areas to research in more detail before buying Zilliqa.

Metaverses were all the rage last year and there's still a lot of interest in the sector. Zilliqa's concept of metaverse-as-a-service could take off, but it warrants further investigation. The idea is that companies won't need as much underlying infrastructure to their own virtual worlds, so it would be good to understand the level of actual demand. Plus, other projects are also offering this service so it's worth looking at how Zilliqa stands up against its competitors.

One challenge is that we don't know how the metaverse space is going to unfold. We don't know which (if any) of the decentralized metaverses, such as The Sandbox (SAND) or Decentraland (MANA) will prevail. Moreover, there are big players like Meta (formerly Facebook) and Microsoft building centralized virtual worlds. It isn't clear whether metaverses will be as big as some claim, nor is it clear whether centralized or decentralized models will win out.

Now, Zilliqa isn't only a metaverse token. It's also a smart contract crypto. This is a super interesting space, and there are a number of cryptocurrencies competing to take market share from Ethereum (ETH). The likelihood is that a handful will come out on top, though it is hard to tell which ones will eventually dominate.

One key metric for comparing these types of cryptos is total value locked (TVL) -- the value of the assets on its network. Market leader Ethereum's TVL is over $100 billion, while Zilliqa sits in 65th place with a TVL of around $20 million. On the one hand, this means it has space to grow. On the other, given the project launched in 2017, it shows it has already been overtaken by new smart contract cryptos.

Bottom line

As with any crypto investment, there are two golden rules: Do your own research and only invest money you can afford to lose. Think about how Zilliqa might perform in the long term and how it fits with the rest of your crypto portfolio and other investments.

Zilliqa hasn't yet proved itself in two extremely competitive crypto sectors, and that's one reason to be cautious. Another is that Zilliqa's price has been volatile in recent months even by crypto standards. There is a chance we're looking at the next Ethereum or the next Sandbox, but there's also a chance that speculators are pushing it to unrealistic levels. It may quickly lose the ground it's gained in the past few days.