Decentralized (MANA-USD), like most cryptocurrencies, has rebounded in recent weeks. After prompting last month’s sell-off, concerns about rising interest rates have subsided. Instead of moving to “risk,” investors have warmed to this space.
As a result, MANA largely reversed its January losses. This could continue if the recovery in the crypto market continues. Yes, I talked about how changes in the market environment could mean lower prices ahead for this asset class. Yet, it will not necessarily play out that way. Instead, market shifts (i.e. rate hikes) could drive a net inflow into crypto, sending names across the board to higher prices.
So that means it’s time to buy MANA, right? Not so fast.
There are a few caveats. First of all, it is not certain that a crypto comeback will happen. The most bearish scenario could still play out. And second, even if the bullish outcome prevails, MANA might not be the best way to play it.
So given the choice between niche tokens like this and names like Ethereum (ETH-USD) Where gimbal (ADA-USD)? You might want to stick with the latter instead.
A brief overview of Decentraland
Before we dive any further, here is a brief recap of this token – and the story behind its blockchain.
As the name suggests, this crypto is the native token of the Decentraland metaverse. Think second life but for the era of crypto. Like other virtual reality (VR) universes, not only can you interact in this virtual world you can also to treat inside. In other words, you can buy and sell virtual property within the platform. This is where MANA-USD comes in. It is the medium of exchange for these digital real estate transactions.
The Decentraland platform (and its token) has been around for quite some time. However, it’s only recently that it really took off. When Facebook decided to rebrand Metaplatforms (NASDAQ:Facebook) and going full on the metaverse trend, the token skyrocketed in value.
Meanwhile, MANA has gone from less than $1 to $5.90 per token. Since then, however – with fears of rising rates and the fading meta-trend – it has struggled. While rebounding now, MANA remains more than 47% below its all-time high.
Again, some may see its rebound alongside other cryptos as a sign that the recovery will continue. However, it is not acquired. And even if the recovery continues, there is better ways to play.
MANA-USD vs. General Cryptos
With Decentraland once again on the rise, now may seem like a good time to jump before it hits its peak again. However, there may be two reasons why purchasing MANA before a possible return may not be a risk worth taking.
First, it is unclear if the driver of its recent recovery (the comeback of the crypto market) will continue. On the one hand, some market commentators see rising rates as positive for the asset class. With bonds offering negative yields in this environment, investors can cycle in crypto instead of equities when moving capital out of traditional fixed income assets. But on the other hand, policy changes by the US Federal Reserve could have a more negative impact. Instead of thawing quickly, the “winter of cryptos” could get worse. Increases regulation could also harm the space.
Second, there’s the fact that, given the choice, more general cryptocurrencies are better choices if you’re bullish on the trend. Think of established pieces like Bitcoin (BTC-USD) and Ethereum as well as “Ethereum killers” like Cardano, Polygon (MATIC-USD) and Solana (SOL-USD).
With high functionality, many more use cases, and institutional investors giving them social proof, these names may have more upside potential than MANA. If the rally in this asset class continues, Decentraland could still lag. The only likely way it will make an outsized upward move is if there is a “meta mania” callback.
Stick to other games instead of Decentraland
The jury is still out on whether rising rates will send cryptos even lower – or do the opposite. If you believe the former, now is not the time to buy digital assets, be it BTC, MANA or even pupcoins like Dogecoin (DOGE-USD).
However, if you think the latter will happen? If a rebound continues, established cryptos and top altcoins should still provide much better returns than niche names like Decentraland.
At the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
InvestorPlace.com contributor Thomas Niel has been writing individual stock analysis for online publications since 2016.