Unless you've been living on a desert island for the last decade, you'll have seen the meteoric price rise of many cryptocurrencies. Perhaps you've even invested in some more well-established names such as Bitcoin or Ethereum.
The explosive price growth has attracted more significant numbers of new coins aiming for similar rises. There are dozens of cryptocurrencies released every week, and there are now around 9,800 coins to choose from. It has become progressively more challenging for new and even seasoned crypto investors to decipher where they should put their money.
Six Cryptocurrencies to Watch
Like any volatile asset class such as FANG stocks, droves of day-traders have quit their 9-5 jobs hoping to reap short-term profits. Still, for the most part, investors tend to view cryptocurrencies as long-term investments. That said, such investors aren't immune to big price swings, and long-term buy and hold in the crypto space has spawned the HODL investor – Hold On For Dear Life.
In particular, the sale of risk assets, exchange-listed stocks, rising inflation, expectations of a hike in interest rates, and escalation of the Russia-Ukraine war has led to a tough start for cryptocurrencies during the first quarter of 2022.
Since then, digital assets seem to be finding a firmer footing. So, if you have a long-term view and can afford to lock your money away (and don't mind the volatility), now seems a good time to consider investing in cryptocurrencies. However, before wiring any money to your broker, here are a few things you need to consider when researching your target coins.
- Longevity (how long the coin has been on the market),
- Track record (how has it performed – the more data you have, the better),
- Technology (how the crypto platform performs in terms of usability and security)
- Adoption rate (how many people are considering the crypto because a high adoption rate is an indication of better liquidity)
Based on market capitalization, position, and future price potential, here is a list of the six best cryptocurrencies that should be on your watchlist.
Bitcoin, the king of cryptocurrency, is not only the first but also the most traded and valuable crypto in the world today. This crypto also benefits from the largest market cap of above $860 billion, ensuring investors' liquidity. There are also more practical reasons for investing in Bitcoin; Demand for this cryptocurrency comes from the many businesses that now accept Bitcoin as payment. Even the larger banks are starting to integrate Bitcoin into their transactions.
As an alternative to Bitcoin, a quick note on certain altcoins. Their prices are closely correlated to Bitcoin's price, so investors should know that what might seem like an alternative has a similar risk profile to Bitcoin. The current inflation rate of Bitcoin is around 1.7%, which tends to be halved every four years, a phenomenon that is commonly known as Bitcoin Halving.
Ethereum came into existence in 2015 only but and since then, it has seen massive gains due to its unique technology. Although it tends to play a support role to Bitcoin, it is far ahead of its competitors. It is one of the most discussed cryptocurrency projects globally, and big business names like Microsoft, J.P. Morgan, Chase, Intel, etc., are building software that can drive Ethereum. Additionally, non-fungible tokens also use Ethereum in their code, which means that as NFTs attract more interest, the price of Ethereum will benefit.
Looking at the pace of Ethereum growth and the market enthusiasm for the technology, there's still a lot of room for growth and be aware there's an upgrade due later this year that could offer more upside potential. After the upgrade, like Bitcoin, Ethereum will become a proof-of-stake- cryptocurrency.
Proof-of-stake means that Ethereum can build consensus, allowing transactions to be processed and creating new blocks in a blockchain. Crypto mining on this blockchain will become obsolete after an upgrade, and it will decrease the number of coins and their energy consumption.
Solana is one of the top competitors of Ethereum. In 2021, it started at as low as $1, and now, it is trading at $100. Solana is also the fourth most prominent and promising cryptocurrency having a market cap of $54 billion. It has millions of dollars locked in its blockchain, and thus it is a vast blockchain for decentralized finance. It is also synonymous with its high transaction speed of 65,000tps, smart contracts, and Dapps.
Solana competes with Ethereum as its blockchain has minimal transaction fees, and it is an excellent benefit for retail traders who cannot pay 3-figure gas fees on ETH. Lower costs and the delay in Ethereum 2.0 are two reasons more people adopt Solana. Solana mainly focuses on scalability, and it uses a hybrid proof-of-stake consensus mechanism with proof of history for processing its transactions.
Since its launch with a value of $0.77, it gained 22,000 percent and showed a value of $171 in January 2022. In March 2022, it jumped over 23.3%, but it is still half of its all-time high jump that it showed around six months ago.
Cardano is again a good crypto investment as it has 6th rank with a market cap of $51 billion. In comparison to Bitcoin, its small footprint attracts a lot of investors as less energy is needed to complete a transaction in Cardano, meaning it is fast and cheap. In 2021, Cardano introduced an upgrade named “hard fork” that enabled smart contract deployment in it and thus enhanced its functionality. It also works on the PoS model to decrease environmental impact through staking.
Though many altcoins enter the market every day, only a few have real potential; Cardano is one such promising platform. The price has continued to grow since its launch, rising from $0.0017 to the current trading rate of $1.07 (as of the first quarter of 2022). The ADA-USD is superior and more energy efficient in facilitating Defi transactions and smart contracts. So, if you want to invest in crypto, which does not have an excessive price, this digital token is a good choice.
Another cryptocurrency that you can consider this year is LUNA, a native token of the Terra blockchain. The terra blockchain has stable coins pegged to fiat currencies like the South Korean won, the IMF's exceptional drawing rights currencies, and the U.S. dollar to power global payment systems.
The LUNA helps stabilize stable coins' prices. When there is more demand for Terra stable coins, LUNA coins are burned and increase the value of each coin, while when people sell out stable coins, Terra creates more LUNA coins, thus diluting the value of LUNA coins. The nature of LUNA as a governance token is good for LUNA owners.
The market has a high demand for UST, and its market cap currently stays at $16.6 billion against the $13.3 million with which it debuted. As a direct result, Luna's prices reached $116. If you see LUNA trends, you will notice that LUNA has been increasing since June 2021.
A development team created Polygon to contribute to the Ethereum blockchain platform. It is helping decentralized application developers avoid high gas fees. The high gas fees of Ethereum are making it difficult to upgrade it to Eth2, so its co-founder, Vitalik Buterin, wanted support for layer two solutions.
These layer two scaling solutions will submit the transaction to Ethereum's layer one blockchain after handling transactions on a side chain. As a result, you have to pay lesser transaction fees, and it takes less time to settle the transactions. Some switching costs are applicable to ensure that people do not shift their assets from Polygon soon. This cost will make people stay on Polygon for a longer period.
Like many cryptos, only the bigger exchanges list Polygon, and its token “MATIC” can be used for transaction fees, payment services, and a settlement currency. New developments can also benefit Polygon prices. If you buy these assets, you can also gain ownership of ZO metaverse real estate. In recent years, NFTs are becoming very popular on Polygon. Since the beginning of 2021, there has been a 7000% increase in transactions, with a spike of 8.9 million in June 2021.
The recent price volatility of crypto prices has brought investors an opportunity to buy at price levels not seen in several months. While there are many unknowns, particularly how inflation and the stock market will impact crypto investors' appetite but those aside, now could be a rare chance to join the crypto market.
Whether you decide to put most of your money into the more prominent names such as Bitcoin and Ethereum or allocate your funds thinly across several coins comes down to risk tolerance and personal preference.
There's an old saying in investing: time in the market beats timing the market. Finessing the perfect entry is a fool's errand; It's better to reduce your investment to an amount you don't mind losing. Invest small amounts regularly throughout the year and do lots of reading before committing money. Hopefully, this article will help you on your way.
More Articles by Wealth of Geeks
This article was produced and syndicated by Wealth of Geeks.
Featured Image Courtesy of Wealth of Geeks.
Tim Thomas was born in Guildford and now lives near Southampton, the UK with his family. Tim started his career in the financial markets and has traded and invested in stocks, options, forex, futures, crypto, and real estate for over 20 years. His website, https://timthomas.co/, is dedicated to teaching swing trading strategies for profits, helping traders reach their wealth and financial freedom goals.