Is Polkadot an Underrated Crypto Play?

Five years ago, Polkadot (CRYPTO: DOT) was a high-flying cryptocurrency that ranked among the largest in the world. But how times have changed. Polkadot no longer ranks among the top 30 cryptocurrencies and has fallen off the radar of most crypto investors.

So, is it worth taking a closer look at Polkadot? At a bargain price of just $1.84, surely Polkadot must be an underrated crypto, right?

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An ugly five-year chart

The answer, unfortunately, is no. Just one look at Polkadot's five-year chart tells you all you need to know. After hitting an all-time high of $55 back in November 2021, Polkadot soon cratered in value.

Over the past three years, the price of Polkadot has largely flatlined, with nary a recovery in sight. Polkadot now trades at a stunning 97% discount to its all-time high.

In other words, the price of Polkadot has essentially gone to zero. This tends to happen in the cryptocurrency world -- a coin or token launches to much fanfare, skyrockets in price for a short period of time, and then collapses in value, never to recover.

Is a recovery for Polkadot possible?

So, while a short-term recovery for Polkadot might be possible, I'm not holding my breath. The reason is simple: The investment thesis that made Polkadot such a compelling cryptocurrency play five years ago no longer rings true.

When Polkadot launched in 2020, the vision was to create a decentralized internet of blockchains, all linked together by the DOT token. This would make it possible to securely move digital assets across blockchains with as little friction as possible. Polkadot was supposed to become the core building block of a vast Web3 world held together by blockchain technology.

This made sense when new blockchains were launching left and right. For many, it was unclear which blockchain network was going to reign supreme, and it made sense to create a decentralized internet of blockchains. Crypto analysts refer to Polkadot as a "Layer 0" blockchain due to its foundational role in holding everything together.

Layer 0 versus Layer 1

But five years later, we know who won the blockchain race. It's Ethereum (CRYPTO: ETH) and Solana (CRYPTO: SOL). While there are plenty of other Layer 1 blockchain rivals, none are as compelling right now.

For that reason, I'd scrap the idea of investing in a beaten-down Layer 0 network. Instead, move up the value chain and invest in a Layer 1 network. If I had to invest in any blockchain network right now, it would be Ethereum. That's where the future lies, not with Polkadot.

Dominic Basulto has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.