After a period of “crypto winter,” digital currencies have been making a comeback over the last year. Here’s a look at some top buys.
FEB 12, 2024
With thousands of coins to choose from, investing in the volatile world of cryptocurrencies isn’t for the faint of heart.
Key Takeaways:
- Cryptocurrencies are incredibly volatile and not suitable for all investors. Decide if they fit your risk tolerance before diving in.
- Bitcoin and Ether are in a league of their own as the two best cryptocurrencies to buy.
- Four more speculative cryptos are worth a look, each with their defining characteristics.
In just 15 years, cryptocurrencies have emerged from obscurity to become an essential part of financial markets. However, extreme volatility remains a constant.
At its peak in November 2021, the crypto market was worth over $2.9 trillion. By mid-2022, faced with rising inflation and an aggressive rate-hiking cycle by the Federal Reserve, the entire market was worth less than $900 billion. Fast forward to Jan. 22 of this year, and cryptocurrencies collectively were worth $1.5 trillion.
That’s quite a roller coaster. If you’re not willing to endure such violent swings, you simply shouldn’t own cryptocurrencies. And if you do get into crypto, there are thousands of coins to choose from, each with different dynamics. It’s daunting. Here are six of the best cryptocurrencies to buy now:
- Bitcoin (BTC)
- Ether (ETH)
- Avalanche (AVAX)
- Polygon (MATIC)
- Cardano (ADA)
- Cosmos (ATOM)
Bitcoin (BTC)
Cryptocurrency is an incredibly nascent asset class, dating back to 2009. Extreme volatility is par for the course, so investors looking to insulate themselves from the potential total collapse of their holdings will want to go with more established names. None is more established than Bitcoin, the first cryptocurrency and the largest by market capitalization with a valuation of about $757 billion, or more than 50% of the overall market.
BTC boasts the most mainstream acceptance of any of the top cryptocurrencies, as evidenced by the January debut of 11 new Bitcoin exchange-traded funds, or ETFs. The fight with the Securities and Exchange Commission to approve spot Bitcoin ETFs was years in the making, but the approval finally materialized. Bitcoin ETFs have ushered in a new chapter for the leading crypto, as mainstream investors can now track its performance without having to directly own the “digital gold” itself.
After languishing below $17,000 at the beginning of 2023, just over a year later, Bitcoin now trades for upwards of $39,000.
Ether (ETH)
Second by market capitalization is Ether, which is the native token on the widely used Ethereum blockchain. Often colloquially referred to as Ethereum, ETH’s market cap is about $263 billion and accounts for more than 17% of the total cryptocurrency market. Unlike Bitcoin, Ether’s underlying network is far more than just a tool for peer-to-peer payments; the Ethereum blockchain is custom-made for smart contracts and decentralized finance tools, as well as for so-called web3 applications and the trading of non-fungible tokens, or NFTs.
While Bitcoin only functions as a speculative asset and a store of value, Ether has inherent utility as the native token of a wildly popular network. Plus, Ethereum’s switch in recent years from the energy-inefficient proof-of-work protocol to the much more efficient proof-of-stake system gives it a leg up on BTC in an increasingly environmentally conscious world.
While both BTC and ETH are down year to date through Jan. 22, these two cryptos are undoubtedly best in class. Some market watchers speculate that Ethereum ETFs will be the next step in crypto’s mainstream adoption, and if any digital currency is next in line, it’s undoubtedly Ether.
Avalanche (AVAX)
When investing in cryptocurrency, investors should understand that it’s Bitcoin and Ether in their own tier, and then there’s everything else. AVAX and the following altcoins on this list all have more risk, and investors should factor that into their decisions. Consider them purely speculative wagers.
Caveats aside, the Avalanche network’s AVAX token earns its place on this list by virtue of the ambitious goals of the Avalanche blockchain.
Avalanche’s subnets feature allows users to deploy their own mini-blockchains on top of its network. Developer Ava Labs envisions a future in which most mainstream commercial entities and even many individuals will want their own blockchains, with Avalanche subnets offering a convenient solution to that problem. If that reality materializes, then AVAX, which plunged 90% in 2022’s bear market, could emerge as a longer-term winner.
AVAX has surged over the last year, jumping 55% from $18 to $28. It currently has a market capitalization of more than $10 billion.
Polygon (MATIC)
Excluding stablecoins, MATIC is now the 13th-largest cryptocurrency by market cap, with a capitalization of about $6.8 billion. Still constituting less than 0.5% of the overall market size, Polygon has plenty of room to grow. That said, its future success is largely tied to the acceptance and ongoing usage of the Ethereum network. That’s because the Polygon network is a scaling platform that aims to increase the capabilities of Ethereum, allowing it to eventually run a potentially limitless number of decentralized applications, or dApps.
Like practically all other tokens, MATIC’s price suffered in 2022, losing 70% of its value in the year. Since the start of 2023, however, the coin’s price has yet to come back, so consider MATIC, an old-school crypto by the market’s standards, a turnaround candidate.
Cardano (ADA)
Founded in 2017 by Ethereum co-founder Charles Hoskinson, Cardano is a proof-of-stake blockchain and one of the largest blockchains to successfully run that more energy-efficient protocol. Cardano aims to foster a developer-friendly ecosystem for dApps. Unlike Ethereum, Cardano has a hard cap on the number of coins that can ever exist, topping out at 45 billion. Thankfully for investors, around 36.6 billion, or more than 81%, of that supply has already been issued, meaning the amount of overall dilution remaining is both known and relatively limited.
One of the best cryptocurrencies to buy now, Cardano shed 81% in 2022 but has managed to nearly double since the beginning of 2023, when it was trading for 25 cents. ADA now trades for roughly 47 cents and boasts a market cap of $16.5 billion.
Cosmos (ATOM)
Last and least valuable by market cap is ATOM, the native token of the Cosmos Hub blockchain. ATOM is more than just a means for securing the network. It’s also a governance token, giving holders a say in how the Cosmos ecosystem should evolve. One issue with the nascent cryptocurrency space is that there are so many different, independent blockchains. This is a challenge that Cosmos aims to alleviate by making inter-blockchain communication easier, faster and less expensive. Cosmos’ ultimate aspiration is to make blockchain technology more accessible for both coders and end users, which could pay off if blockchain tech becomes as ubiquitous as some optimists in the space expect.
ATOM, at a current valuation of roughly $3.5 billion, lost 71% in the 2022 bear market. Like most cryptos, it has yet to recover from those losses. ATOM now trades slightly lower than it did at the beginning of 2023.
Conclusion and Predictions
In conclusion, the cryptocurrency market has experienced significant volatility over the past few years, with highs and lows that mirror the evolving dynamics of global financial markets. As of now, several cryptocurrencies stand out as potential investments based on their unique features and market positions.
Conclusion:
- Bitcoin (BTC): As the pioneer and largest cryptocurrency by market capitalization, Bitcoin continues to dominate the market. Its mainstream acceptance, recent approval of Bitcoin ETFs, and a resurgence in value position it as a reliable and established choice for investors seeking stability.
- Ether (ETH): Ethereum’s native token, Ether, remains a powerhouse in the market. With its multifaceted utility, including smart contracts and decentralized finance tools, Ethereum’s shift to a more environmentally friendly proof-of-stake system enhances its appeal. Speculation about Ethereum ETFs suggests growing mainstream adoption.
- Avalanche (AVAX): Positioned as a speculative option, Avalanche’s ambitious goals and unique feature of enabling users to deploy their mini-blockchains make AVAX an interesting choice. Its recent surge in value reflects growing interest, but investors should approach with caution given the higher risk.
- Polygon (MATIC): Functioning as a scaling platform for Ethereum, Polygon aims to enhance the capabilities of the network. Despite a challenging 2022, its potential for growth is tied to Ethereum’s continued acceptance. MATIC stands as a turnaround candidate, appealing to those looking for potential opportunities in established projects.
- Cardano (ADA): Founded by Ethereum co-founder Charles Hoskinson, Cardano operates on a proof-of-stake protocol, emphasizing energy efficiency. With a capped supply and a focus on a developer-friendly ecosystem, Cardano has shown resilience, nearly doubling in value since 2023.
- Cosmos (ATOM): As the least valuable by market capitalization on the list, ATOM serves as the native token for the Cosmos Hub blockchain. Cosmos addresses the challenge of inter-blockchain communication, aiming to make blockchain technology more accessible. However, its recovery has been slower compared to other cryptocurrencies.
Predictions:
- Market Maturation: The cryptocurrency market is expected to continue maturing, with increasing integration into traditional financial systems. Regulatory developments and institutional involvement will play pivotal roles in shaping the market’s future.
- Diversification of Use Cases: Cryptocurrencies will likely see further diversification in use cases, extending beyond speculative assets. Continued development in decentralized finance (DeFi), non-fungible tokens (NFTs), and blockchain applications could drive innovation and adoption.
- Technology Upgrades: Ongoing technological upgrades, such as Ethereum’s transition to Ethereum 2.0, will influence the market. Scalability, energy efficiency, and environmental sustainability will be key considerations for the long-term success of blockchain projects.
- Increased Regulatory Clarity: Regulatory clarity is expected to improve, providing a more stable environment for investors. Clearer guidelines may encourage institutional participation and foster greater trust in the cryptocurrency market.
- Emergence of New Players: While established cryptocurrencies will maintain their influence, new projects with innovative features may emerge. Investors should carefully evaluate the fundamentals, technology, and goals of these projects before considering them for investment.
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