Is this controversial Ethereum-Killer finally a buy?
tron (TRX 0.31%) has always been a polarizing crypto, primarily due to its associations with controversial cryptocurrency entrepreneur Justin Sun, who started Tron in 2017. But it’s getting harder and harder to ignore the fact that Tron has been earning users and released new transaction activity at an impressive rate throughout 2022. Could Tron finally be ready to claim its position as a worthy Ethereum (ETH 1.04%) rival?
The most recent news that has investors buzzing is the announcement that Tron is now the official blockchain for the Caribbean island nation of Dominica. Following this, Tron will issue the first-ever government-backed crypto fan token. And Tron will also officially become legal tender in Dominica. There are also suggestions in the crypto community that Tron could leverage this deal to strike similar deals in the Caribbean and Latin America. If so, it would be huge for Tron to gain acceptance in the global market. So is this controversial crypto finally a buy?
Tron in numbers
Analyzing Tron is like peeling the layers of an onion. If you just look at the surface numbers, everything looks fantastic. Tron now has 115 million users worldwide and has processed over 4 billion transactions since its inception in 2017. Total Value Locked (TVL), which measures activity on the blockchain, is an impressive 5.5 billion of dollars. This ranks Tron #2 among all blockchains, behind Ethereum.
In terms of overall market capitalization, Tron now ranks 15th in the world. He is now bigger than avalanche (AVAX 1.45%), for example, which was once considered one of Ethereum’s main rivals. Add to that the fact that Tron’s price has been surprisingly resilient in 2022, and it might seem that Tron has finally become a worthy rival to Ethereum, which is down nearly 70% for the year.
But there are definitely some red flags about Tron. For example, there have been ongoing concerns about the new algorithmic stablecoin Tron since its launch in May. At the time, the new stablecoin compared favorably to the algorithmic stablecoin for the Earth (LUNA -1.16%) ecosystem. A stablecoin is supposed to avoid the volatility of the crypto market, usually through a peg to a currency like the US dollar. But Terra proved to be anything but stable and crashed, wiping out investors. In June, the algorithmic stablecoin Tron briefly lost its peg to the US dollar, sending alarm bells ringing in the minds of crypto investors everywhere. What if Tron was the new Terra?
And then there are all the opaque behind-the-scenes dealings involving Justin Sun, who continues to be a major influence on Tron. You don’t have to dig very deep to find very salacious (and potentially defamatory) allegations about Justin Sun that implicate the FBI, IRS, and Securities and Exchange Commission. Even if you ignore these claims, there are real concerns that Tron might be a “security” and not a “cryptocurrency”. As a result, Tron is not available for trading on all major cryptocurrency exchanges.
Sun left Tron at the end of 2021 to become Grenada’s ambassador to the World Trade Organization (WTO). This is apparently what led to Tron’s sudden prominence in the Caribbean region in 2022. Sun continues to give interviews about Tron and promote him on social media, even while performing his diplomatic duties.
Is Tron a buy?
This is why I downplay the news surrounding Tron’s expansion into the Caribbean and Latin America. I love the idea of creating “fan tokens” for tourist destinations, and it’s exciting that sovereign states around the world are experimenting with cryptocurrencies as legal tender. But somehow, deep down, something is wrong when it comes to Tron. This may have to do with the fact that Tron appears to be facing huge legal and regulatory uncertainty in the United States and China, where it conducted its initial coin offering (ICO).
For now, I cannot recommend Tron as a purchase. While the recent price of $0.06 may seem attractive, I believe there are several other layer-1 blockchain projects that are much better set up to become “Ethereum-killers” in the future. Investing in cryptocurrencies always involves risk and volatility, and investing in Tron – even at a bargain price – seems to come with an added measure of both.