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1 Best Cryptocurrency To Buy Before It Soars 260%, According To This Prominent Analyst
Polka dotThe price of (CRYPTO: DOT) hit an all-time high of $54.98 on November 4, 2021. This marked a massive 18,859% gain from the token’s initial coin offering price of $0.29 in October 2017. But today, it trades around $6. Like many other altcoins, Polkadot has lost its appeal as rising interest rates have pushed investors towards more conservative investments.
However, some top analysts remain optimistic about Polkadot’s growth potential. Michaël van de Poppe, CIO and founder of MN Trading, recently told his 723,000 followers on X that the altcoin’s price could more than triple to $17-22 in the near term. Should investors take this advice and buy this often-overlooked altcoin today?
Image source: Getty Images.
What sets Polkadot apart from other altcoins?
The Polkadot blockchain was created by Gavin Wood, one of the co-founders of Ethereal (CRYPTO: ETH). Like Ethereum, Polkadot currently uses energy-efficient proof-of-stake (Shop), which stakes tokens instead of mining them, not the energy-intensive proof-of-work (PoW) method used for mining Bitcoin (CRYPTO: BTC).
PoS blockchains are often used to develop decentralized applications (dApps) and other tokens, while the PoW method is simply used to mine native tokens. As a result, PoS tokens are typically valued based on their transaction speed and the expansion of their underlying developer ecosystems, while PoW tokens are valued based on their scarcity and acceptance as a mainstream asset.
Polkadot processes transactions faster than Ethereum and many other PoS blockchains. It does this via “parachains,” a new feature that allows multiple blockchains to work together on the same platform. These parachains make Polkadot cross-compatible with a wide range of incompatible blockchain networks, making it an attractive starting point for developers to build cross-chain dApps, tokens, and other crypto assets.
Polkadot’s flexibility is driving its ecosystem expansion by locking in new blockchain partners, including open-source game launcher Heroic and community-driven funding platform Polimec Protocol. Its own community also plans to allocate three million Polkadot tokens (worth $18 million) to fund the development of more decentralized finance (DeFi) applications. Some developers also see it as a fertile base for the development of new AI applications.
But will Polkadot be able to break out of its niche?
Polkadot’s technology looks promising, but investors should be aware of its three main weaknesses. First, Polkadot still processes transactions at a much slower rate than Solana (CRYPTO: SOL), the The world’s fastest PoS blockchainTherefore, developers who value raw speed over cross-chain compatibility will likely continue to use Solana.
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Second, Polkadot’s parachain is a double-edged sword. It opens the door to smart contracts on other blockchains, but that cross-compatibility also leaves it open to a wider range of security breaches. There are also a limited number of parachains on its blockchain, and those slots are auctioned off to the highest bidder. If those prices rise too quickly, its potential developers could flock to cheaper blockchains.
Finally, Polkadot’s supply is inflationary, growing at a rate of 10% per year. Ethereum, which temporarily went deflationary after The Merge (its transition from PoW to PoS mechanism) in 2022, currently has an annual inflation rate of just 0.3%-0.5%. This growing supply could limit Polkadot’s short-term gains.
Should Investors Buy Polkadot Now?
Polkadot analysis by Michaël van de Poppe seems to be technical rather than fundamental. He says that if it breaks its major resistance point of $9,295, it can move up towards $17-22.
We should take this estimate with a grain of salt, as the broader cryptocurrency market is still weighed down by Bitcoin’s recent woes and an uncertain outlook for rapid interest rate cuts. However, potential approvals of the first spot-priced Ether ETFs could light a fire under Polkadot and other PoS tokens in the second half of the year.
Polkadot is an interesting cryptocurrency that seems much more useful than other meme coins. Speculative investors can nibble at the token at these prices, but it could easily be halved before it doubles or triples again.
Should You Invest $1,000 in Polkadot Right Now?
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Sun Leo has no position in any of the securities mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
1 Best Cryptocurrency To Buy Before It Soars 260%, According To This Prominent Analyst was originally published by The Motley Fool