Regardless of all of the hoopla surrounding Bitcoin (CRYPTO: BTC) and the brand new spot Bitcoin ETFs, the general crypto market has been buying and selling flat to down for a lot of the 12 months. In actual fact, in case you check out the highest 20 cryptocurrencies by market cap, there is just one that is up greater than 20% for the 12 months.
Most certainly, the title of that crypto will shock you. It is Chainlink (LINK 8.31%), now up 21% in 2024. On the power of that latest efficiency, Chainlink has now edged out Dogecoin (CRYPTO: DOGE) to grow to be the #10 cryptocurrency by market cap. At a worth of just below $20 per token, Chainlink is near hitting a two-year excessive. So is that this ignored cryptocurrency now worthy of a spot in your portfolio?
A brand new catalyst for Chainlink?
First, let’s take a look at why Chainlink has been hovering of late. Whereas it is potential to level to a number of short-term technical elements pushing Chainlink greater, the token could lastly have a brand new long-term catalyst in place.
That catalyst is real-world asset tokenization, or RWA tokenization. That is a mouthful, to make certain, nevertheless it has the potential to grow to be one of the crucial vital traits powering the blockchain area for years to return.
Picture supply: Getty Pictures.
Merely acknowledged, RWA tokenization refers back to the course of of remodeling conventional belongings (similar to shares and bonds) into digital belongings that stay on the blockchain. That is now one of many “large concepts” on Wall Road, and it has been promoted by the likes of Larry Fink, the CEO of funding juggernaut BlackRock (NYSE: BLK). On the identical time, Coinbase International (NASDAQ: COIN) has been taking early steps to see how these tokenized belongings may be added to its crypto buying and selling platform. In response to the Boston Consulting Group (BCG), asset tokenization might be a $16 trillion market alternative by 2030.
So the large query turns into: Which cryptocurrencies are going to be on the heart of that pattern? In response to a latest report from K33 Analysis, the “most secure guess” proper now’s Chainlink. That is as a result of Chainlink is a blockchain oracle network, with the first objective of supplying real-world knowledge to blockchain smart contracts. And what do monetary belongings must be priced accurately? A number of real-world knowledge. That is why Chainlink matches so properly into the general asset tokenization narrative.
Déjà vu another time?
Whereas this sounds just like the makings of a unbelievable funding thesis, my solely concern is that we have seen this story earlier than with Chainlink. Over the last crypto bull market rally, in 2020 by way of 2021, Chainlink was on the very heart of the decentralized finance (DeFi) pattern. Since sensible contracts are one of many cornerstones of DeFi, and since Chainlink provides knowledge to sensible contracts, it solely made sense that Chainlink would in the end soar in worth because the DeFi narrative gained steam.
And certainly, Chainlink skyrocketed in worth, from a worth of $5 in March 2020 to a worth of over $50 in Could 2021. That is a tenfold return on funding in simply over a 12 months! However the worth finally collapsed to beneath $10, and traded there till final October (when the K33 Analysis report got here out).
The place does Chainlink slot in your portfolio?
For that cause, I am not recommending Chainlink as the primary crypto in your portfolio. It is just too dangerous. However there’s a potential position for Chainlink by way of total portfolio diversification. As we’re seeing now, Chainlink is a uncommon crypto that may zig whereas the remainder of the crypto market zags.
Furthermore, if the asset tokenization pattern takes off, then Chainlink might present monumental worth to affected person long-term buyers. There’s one thing very thrilling about getting in early on a pattern that might be price $16 trillion. That being mentioned, preserve your expectations for Chainlink in test and preserve a long-term outlook.
For now, Chainlink could also be too dangerous and speculative for many buyers. Nevertheless it has definitely earned a spot on my funding radar. If the asset tokenization pattern actually does take off, then Chainlink might soar properly past its all-time excessive of $53.
Dominic Basulto has positions in Bitcoin. The Motley Idiot has positions in and recommends Bitcoin, Chainlink, and Coinbase International. The Motley Idiot has a disclosure policy.
