gimbal (ADA-USD), the seventh-largest cryptocurrency by market capitalization, has been in freefall for six months. The crypto ADA peaked at $2.96 on September 1, and by February 14 it had fallen to $1.05, a 64.5% decline over that time.
It’s more than a correction. There is no other way to describe it than a massive depression. Unfortunately, this is very characteristic of many cryptocurrencies. Investors have to get used to it. They should expect this.
The way to handle this is to have an average cost plan. Never put in your entire allocation for investing in cryptocurrency at one time.
The reason for this is that within six months to a year, you will most likely have the opportunity to buy at a much cheaper price. This means lowering your average cost by buying more as the currency goes down.
Indications of value in Cardano
In the long term, this should probably work, although unlike stocks or bonds, there is no real link to the underlying value.
I tried to point out that there are certain ways to measure indications of value. But it’s not the same as you have with fundamental stock analysis.
For example, in my last post, “Cardano poised to rise from here on strong wallet growth,” I referenced an article in Crypto Potato Magazine. It showed that the number of digital wallets holding Cardano had reached 3 million. This was less than two months after the cryptocurrency registered 2.5 million addresses, as tweeted by the Cardano Foundation.
The number of wallets containing Cardano is not in itself a fundamental factor that could lead to an increase in the price of the ADA crypto. But its growth rate is an index of value, which is not the same as a fundamental factor.
Investors buy the dip
Another indication of value is the fact that investors seem to be buying more Cardano at these prices. A number of articles now show that investors seem to be falling on average, as they should when an asset is close to a bottom price.
For example, CryptoPotato recently wrote that Cardano investors holding between 10,000 and 1 million coins more than doubled in January and are now down to $1.05. They mentioned a tweet from Santiment where they said these investors had 113% more ADA crypto in their “bags.”
Additionally, articles are coming out in publications like CoinGape which ADA Buyers ‘Defend’ the support price of $1.
What to do
The lesson to be learned from this is that there is no way to determine the long-term bottom of a cryptocurrency. There are only tangential value indications. For example, if more people find cryptocurrency useful, their demand for tokens will increase.
This could happen now with Cardano, now that it has moved to allow smart contracts, as I wrote about earlier in January. It has to do with the Alonzo fork upgrade for Cardano which happened in September 2021.
But this point was the peak of Cardano’s price. Since then, ADA crypto has been in free fall. Averaging up Cardano is the best way to eventually reduce its cost enough to secure a profit. But this profit can take very long term. At the moment, it’s more than the last six months.
This is the reality of Cardano and a number of other cryptocurrencies. They are extremely volatile and are only suitable for a small portion of most people’s total portfolio. The way to handle this is to make room for the average crypto ADA with any particular purchase.
As of the date of publication, Mark R. Hake did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.