While Bitcoin (CRYPTO: BTC) and the introduction of spot Bitcoin ETFs have captured widespread bitcoin alternative, the broader cryptocurrency market has remained relatively stagnant or declined throughout the year. However, among the top 20 cryptocurrencies by market capitalization, one stands out with a year-to-date increase exceeding 20%.
Unexpectedly, this cryptocurrency is Chainlink (CRYPTO: LINK), which has seen a 21% rise in 2024. Due to this uptick, Chainlink has surpassed Dogecoin (CRYPTO: DOGE) in market cap, securing the #10 spot. Currently priced just below $20 per token, Chainlink is approaching a two-year peak. The question arises: should this underappreciated cryptocurrency earn a spot in your investment portfolio?
Potential Growth Driver for Chainlink
A closer examination reveals potential reasons behind Chainlink’s recent surge. While short-term technical factors may have contributed, a more significant, long-term growth driver has emerged: real-world asset (RWA) tokenization. This concept, though complex, could significantly influence the blockchain sector for the foreseeable future.
In essence, RWA tokenization involves converting conventional assets, like stocks and bonds, into digital assets on the blockchain. This innovation has gained traction on Wall Street, with figures such as BlackRock CEO Larry Fink endorsing it. Coinbase Global (NASDAQ: COIN) is also exploring the incorporation of these tokenized assets into its trading platform. According to Boston Consulting Group (BCG), the asset tokenization market could reach $16 trillion by 2030.
The question then is, which cryptocurrencies will lead this trend? K33 Research suggests Chainlink is a prime candidate. As a blockchain oracle network, Chainlink’s main function is to provide external data to blockchain smart contracts, crucial for accurately pricing financial assets. This positions Chainlink well within the asset tokenization narrative.
Repeating History?
While this presents a compelling investment case, there’s a sense of familiarity with Chainlink’s story. During the 2020-2021 crypto bull market, Chainlink played a central role in the decentralized finance (DeFi) movement. Given Chainlink’s role in supplying data to smart contracts, a key DeFi component, its value surged tenfold from $5 in March 2020 to over $50 in May 2021. However, its price later fell below $10, remaining there until the recent K33 Research report.
Bitcoin Alternative: Portfolio Considerations for Chainlink
Given its volatility, Chainlink may not suit every investor’s initial crypto allocation. However, it could contribute to portfolio diversification, offering potential gains independent of broader market trends.
Should the asset tokenization trend materialize, Chainlink could provide substantial returns for those willing to invest long-term. The prospect of early involvement in a trend poised to be worth $16 trillion is enticing. Yet, it’s wise to temper expectations and adopt a long-term perspective for Chainlink.
Chainlink’s current risk and speculative nature may deter some investors, but it remains on my watchlist. If asset tokenization gains momentum, Chainlink’s value could exceed its historical peak.
