The cryptocurrency market has exploded in 2021, with coins going 100x left and right. Will Algorand join the “100x club”? Is Algorand a good investment in 2021?
Yes, Algorand is a good investment in 2021. It’s one of the most promising blockchain projects in terms of technology and use cases. In addition, there are a number of real world projects using the Algorand blockchain, increasing its value.
Let’s break it down, and analyze Algorand as an investment in 2021:
The Economics of Algorands coin – ALGO
The ALGO cryptocurrency, which is what you buy to invest in algorand, has a high supply.
The current circulating supply of ALGO is roughly 2.8 billion coins, which is a lot:
This naturally causes the price per coin to be relatively low, compared to other projects.
What’s more important to understand is the rate of inflation that ALGO will experience.
The fact is that ALGO will have a high rate of inflation, meaning that a lot of new coins will come into circulation.
They plan to distribute an average of 800 million coins per year until 2030.
Just like the U.S. Dollar is devalued by money printing, this drives the price down, which is bad for investors.
Take a look at the future inflation rate of the ALGO below.
The orange line is the inflation rate, with values at the right vertical axis. The blue pillars is the circulating supply, with values at the left vertical axis:
The inflation rate in 2021 will be around 29%. This means that the circulating supply of ALGO will increase with 29%.
Remember, the way to calculate the price of ALGO is to divide the market cap by the circulating supply.
If the supply increases, the price has to decrease.
This is probably the most problematic aspect of investing in Algorand in 2021. The rate of inflation is super high.
However, there is a reason for the high inflation rate, and it’s good.
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Is Algorand a Bad Investment Due to its High Inflation Rate?
High inflation is generally bad for the value of an asset. However, it’s not that simple. We have to look at why Alorand has chosen this type of distribution for their coins before concluding anything.
In fact, the high inflation can be used as an argument for investing in Algorand.
Hear me out:
The high inflation rate means that a lot of new coins are being distributed. These tokens are being given as incentive for developers and stakers.
The fact that the inflation rate is so high, makes it attractive to stake, and build stuff on.
If Algorand manages to attract a lot of developers and business, as well as stakers, the high inflation rate makes the blockchain more secure (due to more stakers) and the ALGO coins more valuable (due to more use cases).
In other words, high inflation is good for business, which again is good for the value of the ALGO coins.
So far, this strategy seems to work well. They have a lot of traction when it comes to bringing business and stakers to the Algorand ecosystem:
The Algorand Ecosystem
The ecosystem built around and on top of Algorand is a huge upside for ALGO investors.
This is basically how it works; more projects built on algorand = increased ALGO price.
Well, that’s good news – Algorand has tons of projects built on it, as well as projects in the pipeline.
This is taken from the Algorand website:
I would like to mention one use case that I really like:
Marshall Islands’ Sovereign Digital Currency Will Be Based on Algorand
Even though the Republic of the Marshall Islands only has a population of 55 000, it’s a big deal that they’re building their national currency on the Algorand blockchain.
If they do it successfully, other countries might follow – increasing to value of ALGO a lot.
Technical Analysis on Algorand as an Investment for 2021
Let’s look at the price charts, and see what they tell us about the possible outcomes for Algornad this year.
I like to keep things simple when performing technical analysis on cryptocurrencies. If you’re unfamiliar with basic technical analysis, read this article:
Bitcoin Technical Analysis: How to Read Bitcoin Price Charts Like a Pro
We’re going to look at algorand priced in USD, BTC and ETH. This way, we get a few different perspectives, and a more complete understanding of the price moves of the cryptocurrency.
Let’s begin with ALGO / USD:
The red horizontal line was a long term resistance line. This line held us down for almost two years.
However, in 2021 we have surged above it, and flipped it into support.
Flipping previous resistance into support is a major bullish sign.
It is in fact what Bitcoin did in the end of 2020, and we all know what happened in the following moths… The price surged several hundred percent.
The ALGO / USD chart is bullish, and indicates that Algorand is a good investment in 2021.
Let’s move on to ALGO / BTC:
This chart is more ambiguous, however, it gives us an idea of what risk and possible return we can hope for when investing in Algorand this year.
The best possible outcome when investing in Algorand in 2021 is 0.00011158 BTC, and the worst outcome is 0.00000112 BTC.
To get this in dollar terms, you need a price prediction for Bitcoin in 2021, and calculate how the amount of BTC into USD:
I believe Bitcoin will reach at least $100 000 in 2021.
This gives us what we need to calculate the predicted USD price for Algorand:
Best possible outcome for investing in Algorand in 2021:
0.00011158 BTC * $100 000/BTC = $11.158 USD
Worst possible outcome for investing in Algorand in 2021:
0.00000112 BTC * $100 000/BTC = $0.112
This gives us the best and worst possible outcome, and an idea of the risk/reward of investing in Algorand in 2021.
Are you willing to risk investing in Algorand, when you know that the price might tank down to $0.112? Well, with the possible returns of a surge to $11.158 it may be worth the risk.
Let’s take a look at the ALGO / ETH chart:
This chart just looks bearish… You can see that we’re trending down, and we’re heading for lower prices in the future.
Remember, this chart shows the ratio of ALGO / ETH. Even though this is trending down, the USD price of ALGO might go up.
This chart only tells us that ETH is outperforming ALGO, not that ALGO is decreasing in terms of USD.
We can do the same calculations as we did for BTC, with my predicted Ethereum price of $8000 in 2021:
Best possible outcome for Algorand if the channel holds:
0.00041460 ETH * $8000/ETH = $3.31
Worst possible outcome for Algorand if the channel holds:
0.00010072 ETH * $8000/ETH = $0.80
As you can see, the technicals of this chart tells us that not much can be expected from Algorand in 2021. However, this is far from certain.
The USD chart looked bullish, and might just send the price surging this year. After all, flipping multi-year resistance lines into support is not something you see everyday…
To conclude our technical analysis of Algorand:
I’m going to be honest; in 2021 I would rather invest in Ethereum or Bitcoin. Nevertheless, it looks as though the ALGO cryptocurrency will increase in terms of USD, but ETH and BTC will probably outperform it, and increase even more than Algorand in 2021.
The Team Behind Algorand
When analyzing a potential cryptocurrency investment, it’s important to take a look at the team behind it.
We’ll look at the three leadership position, Founder, CEO and COO:
Founder: Silvio Micali
This guy has been a key figure in the development of modern cryptography, and has been a faculty member at MIT since the 80’s.
In addition, he has received a bunch of awards, including the Turing award and the Gödel Prize.
In other words:
Silvio Micali, the founder of Algornad, is super smart, and knows basically everything about cryptography.
CEO: Steve Kokinos
Steve Kokinos has founded and run several successful businesses in the past.
The most recent is FuZe, which has over 700 employees and serve over 1500 enterprise customers.
What you need to know:
Steve Kokinos, the CEO of Algorand, has a lot of experience and know-how when it comes to running successful businesses.
COO: W. Sean Ford
W. Sean Ford is responsible for product management, engineering, marketing and global community development.
He came from LogMeIn, where he was responsible for global marketing strategy, product marketing, ecommerce, communications, brand leadership, and demand generation.
He has a ton of prior experience in leadership positions, including CMO and COO of Zmags, and as vice-president of Global Business Unit (GBU) marketing at Oracle.
In other words:
W. Sean Ford, the COO of Algorand, knows his way around the business world, with tons of experience from several companies. He knows how to do his job.
Algorand Team Conclusion:
The leadership of Algorand is top notch from both a tech and business standpoint. This is a rare combination, as most cryptocurrency teams are either heavily focused on technology or business. This is good for Algorand investors.
Should You Invest in Algorand in 2021?
After looking at several different ways of analyzing Algorand as a potential investment in 2021, this is what I have to conclude with:
Algorand is a good investment in 2021, due to its superior technology and large ecosystem of use cases. However, according to technical analysis it’s only bullish in terms of USD, not in terms of ETH or BTC. Therefore, cryptocurrency investors should consider investing their capital in Ethereum or Bitcoin before investing in Algorand.
Also, the high inflation rate is a cause for concern for crypto investors, as it drives the price down over time. However, this high inflation rate might attract more developers and stakers, which might be enough to counter the devaluation.
For an in-depth look at the technology behind Algorand, read this article:
How Algorand Solves “The Blockchain Trilemma”
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