Polkadot

Polkadot Returns vs S&P

-73.70%

Versus S&P

-9.50%

33 minutes ago

-73.70%

Versus S&P

-9.50%

33 minutes ago

6m High

6m Low

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Polkadot

$37.96

$8.33

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S&P 500

4,796.56

3,900.79

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Polkadot

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S&P 500

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Does not follow the stock market

Sources: SPX, DOT

    Reasons to Invest

  • Polkadot (DOT) is a “layer 0” blockchain that intends to make other blockchains (e.g. Bitcoin, Ethereum) interoperable. This way investors will be able to swap crypto assets across blockchains without the use of an exchange.
  • While Polkadot has a solid value proposition, many other blockchain projects are implementing similar features (e.g. bridges, sharding) to address interoperability and scalability.
  • Polkadot does not have the best track record when it comes to security, as millions of dollars have been hacked from the founding team’s wallet during their early days.
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Highlights

Good For

High risk, high return

Time Horizon

3-5 years

Diversification

Environmentally Friendly

Bitcoin was the first cryptocurrency in the world, offering the ability to store and transfer value in a trustless manner. Then Ethereum came along and offered the ability to perform more complex tasks through smart contracts. But Ethereum's popularity has been a double-edged sword that resulted in high transaction fees and network congestion. Not to mention, it is still cumbersome to move crypto assets between blockchains like Bitcoin, Ethereum and others. Polkadot (DOT) is a “layer 0” blockchain that intends to make other blockchains more scalable and interoperable through its Relay Chain, Parachains and Bridges. Additionally, Polkadot is a Proof-of-Stake (PoS) blockchain, meaning that investors can generate passive income by staking their DOT. While Polkadot has a lot going for it, it is competing within a space that is saturated with many other promising smart contract platforms.

DOT’s price has appreciated by nearly 2,000% since it began trading on public markets. However, DOT has also lost up to 75% of its value during market crashes.

avg

+221.7%

Avg Annual Returns

Past 10 years

Ways to Invest

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Want to keep it traditional?

Buy individual shares of Coinbase (COIN), the largest exchange for Bitcoin and other altcoins (including Polkadot). Coinbase went public back in April 2021.

Compare Cryptocurrency Returns

Risk Score

6M Growth

Polkadot

DOT/USD

49

-73.43%

Bitcoin

BTC/USD

67

-47.35%

Risk Analysis

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Risk Analysis

As of 05/28/2022

49Moderate

Compared to

S&P 500
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Polkadot

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S&P 500

49Moderate

Polkadot is a very young project, considering that the network and ecosystem launched in 2020. This makes it a riskier bet, which could (or could not) end up paying off in the long-run. Polkadot isn’t truly an “Ethereum Killer,” as it intends to enhance some of Ethereum's capabilities. That said, Polkadot is going to have a hard time growing if Ethereum 2.0, or blockchains like Cardano (ADA), Polygon (MATIC) and Cosmos (ATOM), solve these scalability and interoperability issues first.

Performance During a Recession

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Performance During a Recession

In the early days of crypto, most investors believed that these assets would always remain uncorrelated to stocks. In recent years, that no longer appears to be the case. History shows us that during the 2020 U.S. recession, investors jumped into risk-on assets like crypto to hedge against inflation. On the flip side, when the government announced measures to combat inflation, investors sold off their crypto. During these market downturns, large-cap cryptos like Bitcoin and Polkadot tend to drop 50% more or less, which is still nothing compared to small-cap altcoins (-90%).

Drawbacks

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    Drawbacks

  • Polkadot’s development was kicked off in 2017, but it only became fully operational in 2020. Compared to a platform like Ethereum, Polkadot is not tried-and-tested.
  • While Polkadot has a solid value proposition, many other blockchain projects are implementing similar features (e.g. bridges, sharding) to address interoperability and scalability.
  • Polkadot does not have the best track record when it comes to security, as millions of dollars have been hacked from the founding team’s wallet during their early days.
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How You’re Taxed

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How You’re Taxed

Income Tax

Income Tax

Capital Gains

Capital Gains

In the U.S., any time an investor sells or swaps their crypto, they owe capital gains taxes. The exact rates vary: with short-term capital gains taxed as income (ranging from 10% to 37%), and long-term capital gains ranging from 0% to 20%. While simply holding DOT does not incur any taxes, receiving DOT from staking rewards is taxed as income. 

Staking

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Staking

In addition to benefiting from price appreciation, DOT holders can also generate passive income through staking. When an investor stakes their DOT, those tokens are locked up for 28 days and used to validate network transactions. In exchange for this lockup period, DOT holders are rewarded with 13% interest on average as of February 2022.

Did You Know?

  • poitStar

    Polkadot was founded by Dr. Gavin Wood, who also co-founded Ethereum and helped develop Ethereum’s Solidity programming language.

  • poitStar

    Polkadot had an initial maximum supply of 10 million tokens, which the community voted to increase to 1 billion DOT in 2020.

  • poitStar

    The Polkadot team raised $145 million in their 2017 Initial Coin Offering (ICO) but lost about 60% of those funds due to a wallet vulnerability now known as the Parity bug.  To make up for this devastating loss, the team had to hold two more private sales in the following years.

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