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Cronos' decision to cut rewards put the cat among the pigeons.
Key points
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Cronos is the native token for the popular crypto app and exchange, Crypto.com. Its price soared along with many cryptos last year, with an increase of over 850%. This was partly a result of the platform's heavy promotional activity. For example, it bought the naming rights to the Staples Center -- now the Crypto.com Arena. Matt Damon was also the face of a high-profile advertising campaign.
However, Cronos slipped from its position as a crypto darling in early May after it arbitrarily slashed its staking rewards. Crypto.com quickly backtracked on the decision and announced much less drastic rewards revisions. All the same, the move put a big dent in investor confidence, as we'll discuss in this article.
Cronos basics
Cronos is a utility token for the Crypto.com platform. Users can get fee discounts by paying with CRO and also stake the tokens to qualify for benefits. These include higher interest rates on deposits and better benefits on the Crypto.com prepaid debit cards. The more CRO staked, the better the rewards.
Formerly known as the Crypto.org Coin, Cronos rebranded last year to reflect the fact that Crypto.com is more than a crypto exchange. It's also a programmable blockchain that hosts a broad ecosystem of applications. It's one of several Ethereum (ETH) alternatives that have gained traction as developers look for less congested blockchains with lower costs. The Cronos smart contract blockchain works with both the Ethereum and Cosmos (ATOM) ecosystems.
Should you buy it?
There are several factors to take into account before you buy crypto: Your financial situation, your investment strategy, and your belief in that particular project's potential.
1. Your financial situation
The golden rule of crypto investing is to only spend money you can afford to lose. That way, if things go wrong it won't completely derail your finances. Moreover, prioritize goals that will build financial stability in the long term before you buy any crypto. For example, if you're trying to pay down debt or build an emergency fund, these should take priority over cryptocurrency investments.
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Get started2. How it fits with your investment strategy
Everybody has their own reasons for buying crypto. What matters is that you understand the risks involved and know how to minimize them. If you aren't comfortable with high-risk assets, crypto may not be right for you.
It's also important to be clear about how CRO might fit with the rest of your crypto portfolio and your other investments. Crypto assets are high risk and volatile investments, and there's a lot we don't know about how they will evolve. As such, experts recommend you only put a small percentage of your total portfolio into crypto.
3. How Cronos might perform long term
Cronos has some major positives. It's a well-established smart contract platform that's already attracted a decent number of projects. And the Crypto.com exchange has been relatively successful in attracting crypto investors. However, the decision to change the staking rewards earlier this year raises questions about how sustainable it all is.
Sure, the exchange did dramatically tone down its proposed changes, but there's no guarantee it won't attempt to change staking benefits again further down the line. CRO's price may also drop in six month's time when the reduced rewards rates actually kick in. There's also concern over why it decided to slash rewards. Some fear Crypto.com has overextended itself with heavy promotional spending.
Bear in mind that the climate has become more risk averse and some of the heat has gone out of the crypto industry, which could be a problem for crypto platforms. Other crypto exchanges such as Coinbase are already slowing their hiring efforts due to the slump in trading volume. As an investor, it's worth considering how the platform might survive a prolonged dip in both prices and crypto trading.
Bottom line
Crypto.com and Cronos have a lot going for them as a crypto exchange and a smart contract platform. However, in spite of heavy promotional activity, it isn't topping the bill in either category. According to CoinMarketCap, Crypto.com is the 15th biggest exchange in terms of trading volume. And DeFi Llama puts Cronos in seventh place in terms of the amount of money on its platform.
As with any crypto, it's important to do your own research to evaluate how it might perform in the long term. For Cronos, some areas to pay attention to include how it stands up against the competition and what might happen if crypto continues to underperform.
The right crypto investing mindset
Investing in crypto can be extremely risky. We think investors should approach these assets like any other technological investment — with a long-term mindset and the expectation of ups and downs. The Fool realizes there may be opportunities for investors. We do actively recommend select cryptocurrencies to our community. But we encourage everyone to be well versed prior to investing to understand the potential risks and rewards.
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