What is Algorand? Is Algorand a Good Investment?
Self-proclaimed "Blockchain of FutureFi”, the Algorand cryptocurrency is relatively new to the market and is rising quickly both on the charts and in popularity. And for good reasons.
So, what is Algorand? Algorand is first and foremost a blockchain ecosystem aiming to solve the primary issue many cryptos face – Scalability.
In this article, we will cover all of the basics around the Algorand ecosystem, as well as how you can trade ALGO (the currency itself) at Admirals.
Table of Contents
What is Algorand? An Introduction
As stated, above all else, Algorand is defined as an overall ecosystem based on the blockchain, carrying two main components: the blockchain platform (Algorand), and the currency which supports it (ALGO).
It can certainly be compared to the Polygon Network (MATIC), in that its primary goal is to improve the scalability of blockchain transactions – enabling transactions to be done faster and more efficiently. Polygon is also both an ecosystem and a currency. Notably, Cardano and Solana are also competitors of Algorand.
Algorand has arguably been nicknamed “The Ethereum Killer”, as its functionality and usability go in direct competition with the more well-known Ethereum.
Not only does the Algorand platform have its own cryptocurrency, ALGO, but the network can also host other cryptocurrencies and blockchain projects – as Ethereum does.
One of the main highlights of Algorand (and blockchain technology itself, for that matter) is that the Algorand platform is completely open-source and operates on Pure Proof-of-Stake (PPoS) protocol. PPoS is actually proprietary to the Algorand blockchain.
Pure-Proof-of-Stake is simply the consensus mechanism that enables the processing of transactions on the blockchain, new block creation and keeping the given database secure. It is also unique in that it rewards holders (or validators) with rewards as the market cap increases. Validating the crypto is ALGO’s form of mining, in the traditional sense of cryptocurrency.
The Algorand ecosystem operates very much with a community-focused and driven essence, where holders and validators of ALGO are rewarded for their participation in the ecosystem (based on the PPoS protocol).
First created in 2017 by Silvio Micali, computer scientist and professor at the Massachusetts Institute of Technology (MIT), it was launched officially in 2019 to the general public.
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What is Algorand Used For?
When answering what exactly Algorand can be used for, we need to approach it with a two-prong outlook: What can Algorand, the platform, do, and what can ALGO, the currency do?
What are the capabilities of the Algorand blockchain platform?
The Ultimate Payment Processor; with the capabilities of low-cost and fast transactions, an involved and growing community that contributes to rewards, and a next-level PPoS blockchain, Algorand can potentially be a leading crypto payment processor.
- Guaranteed Lifetime Transaction Record; unlike cryptos such as Bitcoin, ALGO is prohibited from ever ‘forking’, or splitting, ensuring that no completed Algorand transactions can ever be altered or forgotten.
- Stake Rewards; As already mentioned, Algorand rewards its community who hold and validate ALGO on the PPoS blockchain with stake rewards – the rewards being the Algo currency.
- Smart Contract & Token Creation; Users of Algorand and ALGO have the ability to create smart contracts (agreements for decentralized applications) and tokens for both new and current assets.
What are the use cases of ALGO?
- Official Currency in the Marshall Islands; ALGO was selected to be the first and primary national digital currency in the Republic of the Marshall Islands (Oceania).
- Stake Rewards; Holding and validating ALGO on the Algorand platform allows those individuals to increase their stake in ALGO, ultimately increasing their share of the ALGO currency.
- Ecommerce; You can both buy and sell items or services online using ALGO.
While both Algorand and ALGO remain relatively new in 2023, their popularity is growing quickly and hence the increased options for use cases of the currency will likely follow.
According to Changelly for the year 2023, the minimum price is predicted at $0.26, with the average price at $0.27, and a maximum price prediction of $0.31. At this current time of writing (12/04/2023), the price of ALGO hovers around $0.21.
From a general outlook, one may say the true current value lies within the Algorand platform itself, which means inevitably as the network grows, so will the use cases of ALGO.
Is Algorand a Good Investment?
As always, this kind of question is always subjective to each individual investor and their risk tolerance.
Depending on whether the trader or investor is comfortable with trading in the volatile cryptocurrency market, they will define whether or not they consider Algorand to be a good investment (or not).
The cryptocurrency market certainly is exciting in that it is still relatively new, incredibly volatile, and with much ongoing development and hence, new digital currencies and tokens.
See below the Daily fluctuations of ALGO/USD via the TradingView widget:
*Past performance is not predictive of future results.
The following are some factors to consider when deciding if Algorand (ALGO) is a good investment for your trading portfolio:
- Ongoing Development Goals; although new, Algorand has an impressive and competitive development plan for the future, giving a much more positive outlook as an investment.
- Sizeable Competition; with Cardano, Polygon and Solana as some of Algorand’s competition, this is an important part to watch when considering it as a long-term investment – however, it may be suitable for short-term trading.
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Algorand Pros and Cons
Every new and existing cryptocurrency comes with its advantages and disadvantages. As much positive outlook that the Algorand platform and currency have, all angles must be considered before trading or investing.
Pros of Algorand
- The Green Blockchain; Algorand is officially a carbon-negative blockchain, meaning they offset its carbon emissions beyond its operations. In the height of the ESG (Environmental, Governance, Social) rising trend, this is a huge advantage.
- Scalability; Algorand addresses the biggest issue with crypto – Scalability. Its validation process via its network also simplifies the process, reducing energy use and increasing security via the PPoS protocol.
Cons of Algorand
- Regulation; as the past has shown us, cryptocurrency, in general, can run the risk of interference by governments. Given the high potential for the Algorand network to perform better than say, VISA and Mastercard, this regulation could be a future issue.
- Ethereum's Advantage; aside from the other competitors mentioned, Ethereum was the first player in this competition and will always hold the advantage of being the first to produce DApps (decentralized applications).
Is Algorand Better than Ethereum?
This is a common question within the industry of cryptocurrency; is Algorand truly better than Ethereum?
This question is subjective to many opinions.
In the ‘perfect world’, if Algorand was created first, before Ethereum, the answer would absolutely be yes, Algorand is better.
Why? The functionality of the blockchain ecosystem itself is much more efficient, addresses more use cases, and has an overall broader outlook for the future in terms of infrastructure.
Of course, given the young age of Algorand (compared to Ethereum), Algorand simply learned from Ethereum's mistakes and developed the ecosystem accordingly.
The most notable point to mention when comparing the two is the differences in the consensus mechanisms.
Ethereum uses Proof-of-Work (PoW), whereas Algorand uses Pure Proof-of-Stake (PPoS).
PoW requires a large number of energy resources in order to ‘mine’ the Ether currency. This is what makes transactions, at this point, slow and expensive.
PPoS, on the other hand, is influenced completely by the community base and the existing stake, which has low computation efforts. With the need to only validate (and not solve cryptographic puzzles), this keeps costs literally nonexistent and hence, carbon-negative.
How Can You Trade Algorand?
Given the volatility of cryptocurrency, it is often preferred by traders and investors to trade cryptocurrency for the short term.
With the proper strategy in place, one can trade the ongoing volatility, rather than buying and holding for the long term. Naturally, this makes it viable in that by Buying and Selling, the trader is able to open and close positions frequently, ideally taking a profit.
Below is an example of different indicators you may use to trade the ALGO cryptocurrency CFD using our free access MetaTrader 5 platform, of the leading platforms in the trading industry:
ALGUSD Hourly (H1) Chart on the Trade.MT5 Webtrader platform accessed on 9 March 2022; Chart dated 5 March 2022 – 9 March 2022. MACD Indicator (12,26,9) applied, RSI Indicator applied, Bollinger Bands applied. Past performance is not predictive of future results.
The above shows a short-term trading period on the charts, and as you can see it is reasonably volatile in the price movements.
RSI Indicator
The Relative Strength Index or RSI indicator (blue line) is a good indicator to identify if the asset is either overbought or oversold; when the RSI indicator line falls below 30, this would indicate the asset has been oversold – which has not occurred according to this short-term chart. If the RSI indicator is above 70, it has been overbought – also not the case based on the chart.
The current trend appears neutral based on this reading, indicating it could be a good time to buy in on a position.
MACD Indicator
The Moving Average Convergence/Divergence, or MACD indicator (red line), is another good indicator to use for short-term trading in the cryptocurrency market.
The MACD often also ‘follows’ the RSI, and ideally, they should appear to ‘agree’ with each other on the charts, to make for a confident trade. On the above chart, they are not completely in sync with each other, albeit somewhat close – it would make general sense to monitor how the chart fluctuates in real-time, and open a position when they are following closely in movement (for example, on March 9 2022 at 12:00).
Bollinger Bands
The Bollinger Bands are a technical indicator to anticipate price movements and confirm current trends, making this indicator a good complement to MACD and RSI.
While the middle line shows the SMA (Simple Moving Average), the upper and lower lines move based on price volatility.
In a simplified explanation, the higher the outer bands, the better the time to buy. On the contrary, the lower the outer bands, the better the time to sell.
Based on all three indicators working in conjunction with each other, and based on the above chart, the best time to buy positions on ALGO would have been on March 9 2022 at 12:00h; the RSI and MACD were correlated at this time, with the Bollinger Bands at the same time showing a strong Buy signal.
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Trade Algorand at Admirals
As you may already be aware, Admirals offers cryptocurrency CFD trading on over 40+ cryptocurrency pairs, both with USD, EUR and other crypto cross pairs.
Currently, you can trade the ALGO vs USD CFD, with no commission on trades and a minimum/typical spread of 3%.
For those who want to gain access to the volatile trading environment which encompasses the cryptocurrency market at present, please be aware of proper risk management strategies.
Most importantly, it is always crucial to understand what you’re investing in. We hope you have gained more knowledge around both Algorand (ALGO) and the cryptocurrency industry, as a whole, based on this article’s insights.
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What is Algorand used for?
The Algorand blockchain's primary use is to facilitate and enable new application development involving cryptocurrency via their proprietary decentralized blockchain. These applications can work with various industry verticals, such as real estate, finance, legal and so on. Algorand aims to offer more efficient and scalable blockchain applications.
Is Algorand better than Solana?
In theory, Solana performs more operations per second than Algorand. That said, Algorand appears to have a lesser carbon footprint compared to Solana. Both Solana and Algorand operate on a Proof-of-Stake consensus mechanism, making the two cryptos closely comparable.
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