Despite the commotion around Bitcoin (Cryptocurrency: BTC) And the entire crypto market, including the new Spot Bitcoin ETF, has been flat to declining for most of this year. In fact, if you look at the top 20 cryptocurrencies by market capitalization, only one has risen more than 20% in a year.
You will probably be surprised to hear the name of the cryptocurrency.the wire mesh (cipher: link), rising 21% in 2024. After a strong recent performance, Chainlink is now a close winner. dogecoin (Code:Doge) It will become the 10th largest virtual currency by market capitalization. Chainlink is priced at just under $20 per token, nearing a two-year high. So, is this overlooked cryptocurrency worth having in your portfolio now?
Chainlink's new catalyst?
First, let's take a look at why Chainlink has been soaring recently. While it is possible to point to some short-term technical factors pushing Chainlink up, it is likely that new long-term catalysts will eventually be introduced to the token.
The catalyst is real-world asset tokenization, or RWA tokenization. Sure, it's just a tidbit, but it could end up being one of the most important trends driving the blockchain space for years to come.
Simply put, RWA tokenization refers to the process of converting traditional assets (such as stocks and bonds) into digital assets that reside on a blockchain. This is now one of Wall Street's “big ideas,” promoted by giant investment firm CEO Larry Fink and others. black rock (New York Stock Exchange: BLK). at the same time, coinbase global (NASDAQ:Coin) is taking early steps to see how these tokenized assets will be added to its cryptocurrency trading platform. According to Boston Consulting Group (BCG), asset tokenization could become a $16 trillion market opportunity by 2030.
So the big question is which cryptocurrencies will be at the center of this trend? According to a recent report from K33 Research, the “safest option” at the moment is Chainlink. That's because Chainlink is a blockchain oracle network whose main purpose is to provide real-world data to blockchain smart contracts. And what does it take to price financial assets correctly? Lots of real-world data. So Chainlink fits very well into the whole asset tokenization narrative.
Deja vu again?
This sounds like the makings of a great investment thesis, but my only concern is that I've seen this story before on Chainlink. During the last crypto bull market rally from 2020 to 2021, Chainlink was right at the center of the decentralized finance (DeFi) trend. Smart contracts are one of the foundations of DeFi, and Chainlink is feeding data to smart contracts, so it's no surprise that Chainlink's value would eventually skyrocket as the DeFi story gains momentum.
And indeed, Chainlink's value has skyrocketed, from a price of $5 in March 2020 to more than $50 in May 2021. That's a 10x return on investment in just over a year. However, the price eventually fell below $10, where it traded until October of last year (when the K33 Research report was released).
Where does Chainlink fit into your portfolio?
Therefore, I do not recommend Chainlink as the first cryptocurrency in your portfolio. It's simply too risky. But Chainlink has a potential role in terms of overall portfolio diversification. As we are seeing now, Chainlink is a rare cryptocurrency that can zig while other crypto markets zig.
Additionally, if the asset tokenization trend takes off, Chainlink could offer tremendous value to patient long-term investors. There's something very exciting about getting in early on a trend that could be worth $16 trillion. That being said, keep your expectations in check for Chainlink and maintain a long-term outlook.
At this point, Chainlink may be too risky and speculative for most investors. But it's definitely on my investment radar. If the asset tokenization trend really takes off, Chainlink could soar well beyond its all-time high of $53.
Should you invest $1,000 in Chainlink right now?
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Dominique Basurto has a position in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Chainlink, and Coinbase Global. The Motley Fool has a disclosure policy.
Looking for an alternative to Bitcoin? This overlooked virtual currency is already up 20% in 2024 Originally published by The Motley Fool
