Cryptocurrency is digital money that isn’t managed by a central system, like a government. Instead, it’s based on blockchain technology, with Bitcoin being the most popular one. As digital money continues to gain traction on Wall Street, more and more options become available. There are currently over 19,000 cryptocurrencies on the market.
While you can use cryptocurrency to make purchases, most people treat it as a long-term investment. However, volatility makes investing in cryptocurrency risky, as demonstrated by the recent freefall among cryptocurrencies, including stablecoins pegged to the U.S. dollar. It’s important to know what you’re getting into before you buy in.
That said, these are eight top cryptocurrencies that could prove to be worthy of investment in 2022.
Top 8 Cryptocurrency Investments in 2022
|Binance Coin||$303.91||$49.62 billion|
|Terra 2.0||$6.22||$1.31 billion|
|Data is accurate as of June 1, 2022.|
1. Bitcoin (BTC)
Bitcoin has been around for the longest of any cryptocurrency. It’s easy to see why it’s the leader, with a price and market cap that’s much higher than any other crypto investment options.
Many businesses already accept bitcoin as payment, which makes this cryptocurrency a smart investment. Visa, for example, transacts with bitcoin. And after a four-year cryptocurrency hiatus, Stripe will also let customers accept bitcoin payments. The larger banks are beginning to incorporate bitcoin transactions into their offerings as well.
While Tesla accepted bitcoin only briefly, it might again if mining it becomes more environmentally friendly. In a step toward that end, Blockstream and Block, formerly known as Square, are launching a bitcoin mine in Texas that will be fully powered by Tesla’s solar array and Megapack battery, CNBC reported on April 8.
Bitcoin also got a boost in May, when the Luna Foundation Guard announced it would make $1.5 billion in loans denominated by bitcoin and terra USD to stabilize the latter, Fortune reported.
Risks of Investing In Bitcoin
The value of bitcoin tends to fluctuate a lot. You may see the price go up or down thousands of dollars during any month. That certainly has been true so far this year, as bitcoin prices have correlated to the Nasdaq, as CNBC reported, challenging previous assumptions that bitcoin would serve as hedge against inflation.
If wild fluctuations like these make you nervous, you may want to avoid bitcoin. Otherwise, as long as you keep in mind that cryptocurrency could be a smart long-term investment, these fluctuations shouldn’t be too concerning, and the current low price could present a good buying opportunity.
Another reason to reconsider investing in bitcoin is its price. With a single bitcoin costing over $30,000, most people can’t afford to buy whole bitcoins. For investors who want to avoid buying a fraction of a bitcoin, this is a negative.
2. Ethereum (ETH)
Ethereum is a network that allows developers to create their own cryptocurrency and deploy smart contracts utilizing the network. While ethereum is far behind bitcoin in value, it’s also far ahead of the other competitors.
Even though it came out years after some other cryptocurrencies, it has far exceeded its place in the market because of its unique technology. It’s currently the most popular blockchain and the second-largest cryptocurrency behind bitcoin.
It stands to gain even more ground once an upgrade nicknamed “The Merge” is fully deployed. The upgrade, which is scheduled for August, will shift Ethereum to a proof-of-stake-based consensus that will reduce the number of coins and render mining obsolete. The Merge is also expected to drastically reduce Ethereum’s energy consumption.
Although ether doesn’t have the widespread acceptance bitcoin does, traditional companies are coming onboard. Fidelity, for example, is bulking up its tech workforce to create the infrastructure needed to offer ethereum custody and trading services to its customers, The Wall Street Journal reported.
Risks of Investing In Ethereum
While the Ethereum platform utilizes blockchain technology, it currently has just one “lane” for conducting transactions. This can lead to transactions taking longer to process when the network is overloaded. Transaction fees are also high. The blockchain’s “gas” price — the amount of ether needed to conduct a transaction on the Ethereum blockchain — rose 13% in March due to high demand for block space, CoinDesk reported.
Security has also been an issue. In 2016, for example, a hack that took advantage of a security flaw led to the loss of more than $50 million worth of ether. And in May, the network experienced a security issue following the launch of a new blockchain that runs alongside Ethereum’s mainnet. However, that blockchain is on a test network, so users weren’t affected. The final Merge upgrade is expected to make the blockchain more secure.
3. Binance Coin (BNB)
After years of relatively level prices, at least by cryptocurrency standards, binance coin took off at the beginning of 2021, surging from about $38 on Jan. 1 of that year to an all-time high of $683 in May.
Because of its performance over time, binance coin has proven to be one of the more stable investment options — relatively speaking. It’s the native token on Binance, which is the world’s largest cryptocurrency exchange, according to CoinMarketCap — and on Binance.US, the version U.S. residents must use. But despite its extensive functionality and the coin’s success in Binance sub-projects, binance coin is still a highly volatile investment.
Investors who trade frequently should note that Binance briefly paused deposits and withdrawals for some networks recently, including Polygon and Solana, while it implemented upgrades. The most recent one, on April 8, didn’t affect airdrops — rewards based on a percentage of users’ deposited amounts.
Risks of Investing In Binance Coin
What sets binance coin apart from its competitors is that it was created by a company instead of a group of tech developers, and it’s the native coin on the world’s largest exchange. Although binance coin’s commitment to maintaining a strong blockchain has won over many skeptics, some investors remain leery of this cryptocurrency and its potential security issues.
4. Cardano (ADA)
The Cardano network has a smaller footprint, which is appealing to investors for several reasons. It takes less energy to complete a transaction on Cardano than on a larger network like Bitcoin. This means transactions are faster and cheaper.
Last year, Cardano launched a “hard fork,” an upgrade that increased functionality — in this case, enabling smart contract deployment. As a result, the network is seeing increased activity, which could drive up the price of its coin.
Risks of Investing In Cardano
Even with a better network and the increased functionality smart contracts provide, cardano may not be able to compete with larger cryptocurrencies. Fewer adopters mean fewer developers. This isn’t appealing to most investors who want to see a high adoption rate.
The platform has big plans, such as launching an incubator that would help Africa reach its potential as a major economy, but it remains to be seen whether it can live up to that potential.
Don’t be discouraged by fluctuations in the market. Your investment may lose money one day and make a profit the next. Instead of getting caught up in the day-to-day changes, look at the big picture.
5. Polygon (MATIC)
Polygon was created by a development team that made significant contributions to the Ethereum blockchain platform. Polygon is designed for Ethereum scaling and infrastructure development, according to CoinMarketCap. As a “layer two” solution, it expands Ethereum into a multi-chain system, improving transaction and verification speed.
Polygon has backing from the Binance and Coinbase cryptocurrency exchanges. Its token, MATIC, is used for payment services, transaction fees and as a settlement currency.
New developments that could benefit MATIC prices include the launch by Zo World, a decentralized travel project, of its non-fungible token and other digital assets on Polygon, AMB Crypto reported on April 9. Individuals who buy those assets also gain ownership of Zo Metaverse real estate. Perhaps more significantly, an Indian state government is using Polygon to issue caste certificates to help deliver government benefits to over 1 million low-income citizens, according to CoinTelegraph.
Polygon currently hosts 19,000 decentralized applications — a 500% increase over last October, according to a post on Polygon’s blog. As of last week, Polygon fully supports the tether stablecoin, which could contribute to the network’s future growth.
Risks of Investing In Polygon
Late last year, Polygon disclosed that it had patched a vulnerability that put about $20 million worth of its coins at risk, CoinDesk reported. A hacker discovered the exploit and notified Polygon, which had a fix in place within two days. However, black-hat hackers had already stolen over 800,000 tokens, leaving Polygon on the hook for about $1.4 million.
6. Terra 2.0 (LUNA)
The Terra Classic blockchain used stablecoins — that is, coins pegged to fiat currencies such as the U.S. dollar, South Korean won and the International Monetary Fund’s Special Drawing Rights currencies — to power global payment systems, according to CoinMarketCap. Its native coin, now LUNC, stabilized the prices of the blockchain’s stablecoins.
However, Terra saw a steep decline in early May, spurred by stablecoin volatility and overall skittishness in cryptocurrency markets, halting the cryptocurrency’s strong year.
After the crash, Terra rebranded itself as Terra Classic (LUNC) and launched Terra 2.0 (LUNA), a new blockchain without an algorithmic stablecoin, The Block reported, in an effort to stabilize the Terra ecosystem. The original network’s name has been changed to Terra Classic, and its LUNC coins will trade separately from the LUNA that come with Terra 2.0.
Risks of Investing In Terra 2.0
Terra uses LUNC to stabilize the value of its stablecoins, putting it “in the center of the shock absorption process,” Matt Hougan, chief investment officer at Bitwise Asset Management, told CNBC Make It. In the event Terra’s stablecoins fail to maintain their pegs to fiat currencies, then-LUNA’s performance could suffer, Hougan said. That risk came to fruition when UST “depegged” multiple times over several days in early May, causing terra’s price to nosedive.
The new LUNA is still untested, but it may well be worth watching.
Good To Know
Although Terra has done well in the long-term, it experienced a significant crash on May 12, dropping its value to nearly nothing. It announced in a tweet that it was halting the blockchain temporarily. Do Kwon, founder of Terraform Labs, announced a plan for recovery on Twitter prior to the pause, and Terra has since rebranded as Terra Classic and Terra 2.0.
7. Avalanche (AVAX)
Avalanche is a relatively new “layer one” blockchain — a blockchain that improves the base protocol to make the system more scalable, as Binance described it. It was founded as an Ethereum competitor by Ava Labs and computer scientists at Cornell University, one of whom, former professor Emin Gün Sirer, is a veteran in cryptographic research, according to CoinMarketCap.
Whereas Ethereum’s nodes must all validate each transaction, Avalanche’s three individual blockchains can validate transactions independently. This makes Avalanche more scalable and better able to handle large volumes of transactions — up to 6,500 per second. As a result, it’s increasingly popular among Ethereum projects, U.S. News reported.
As for the coin itself, Bloomberg reported on April 7 that avalanche beat out ether as Terra’s reserve currency for its own UST stablecoin. Luna Foundation Guard, the nonprofit organization that supports Terra, intended to acquire $100 million worth of avalanche as part of that initiative.
AVAX began trading in 2020, in a 24-hour initial coin offering. Its price has fluctuated from a low of $9.34 to a high of $146.22 over the past year. As of June 1, the coin trades for $24.91.
Risks of Investing In Avalanche
Sirer introduced the cryptocurrency via a white paper in 2018. Its launch took place in 2020. With such a short history, avalanche doesn’t have a track record for comparison, making it a riskier investment for potential buyers.
8. Chainlink (LINK)
Chainlink uses a decentralized oracle network to facilitate secure interactions between blockchains and external data feeds, events and payment methods the developers hope will allow smart contracts to become the dominant form of digital payment, according to CoinMarketCap.
One thing working in Chainlink’s favor is a strategic partnership with Google under which Google uses Chainlink’s protocol to connect users to its cloud services, Benzinga reported. The project’s advisors include former Alphabet Chairman Eric Schmidt, DocuSign co-founder Tom Gonser and former LinkedIn CEO Jeff Weiner, according to Securities.io.
Chainlink is also the choice for the new inflation index being built by decentralized finance company Truflation to serve as an alternative to the consumer price index. Whereas the CPI measures inflation using survey data, Truflation’s index will use price data with the CPI’s calculation model, CoinDesk reported. The Truflation index is designed to be more accurate, more transparent and more resistant to censorship than the CPI.
Risks of Investing In Chainlink
Despite its proven utility and support from major players, chainlink has experienced the same kind of volatility as other cryptocurrencies. Its price dropped from about $20 on Jan. 1 to just over $7.10 on June 1.
Don’t settle on any number of cryptocurrency investments without continuing to learn about the market. A new cryptocurrency network could easily climb the ranks and emerge as a leader above other platforms. As an investor, the smartest thing you can do is to stay abreast of market happenings.
Rating the Top Cryptocurrency Choices
Run a quick online search and you’ll find dozens of recommendations for how to invest in cryptocurrency. In choosing the top eight picks, the following factors were considered.
How long has the cryptocurrency been around? New cryptocurrencies aren’t immediately ruled out, but having historical data for comparison helps you see how a company has performed up until now.
How has the company performed during its years in business? If you see stability in prices, that’s a good sign. If you notice that the cryptocurrency is gaining traction and becoming more valuable with time, that’s even better.
Good To Know
Past performance is not indicative of future performance. At any time things can change, and an investment may perform better or worse than it has in the past.
How does the platform compare to others in terms of usability and security? The first thing you want to look for is the speed at which transactions occur. The network should be able to handle transaction traffic with ease.
You also want to make sure your investment is secure. Most cryptocurrencies use blockchain technology, making all transactions transparent and easy to track. Blockchain technology doesn’t necessarily make it harder for hackers to steal your cryptocurrency. It does make it easier to track your investment so it can be recovered instead of being lost following fraud.
How many people are investing in the cryptocurrency you’re considering? When you see a high level of adoption, that means the cryptocurrency has better liquidity. Trading, selling or spending will be easier in the future.
There’s no question about it: Cryptocurrencies are here to stay. The question becomes, where is the best place to invest your money in the market?
As you decide which cryptocurrency is the best investment for you, here are some other things to keep in mind:
- The speed at which transactions are completed
- The fees associated with transacting
- The ability to use your cryptocurrency for regular purchases and bank transfers
If you’re strictly looking to invest without transacting within the network, remember that cryptocurrency isn’t a get-rich-quick scheme. Instead, you should consider it a long-term investment.
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GOBankingRates’ Crypto Guides
- What Is Cardano? (ADA)
- What Is Bitcoin Cash? (BCH)
- What Is Chainlink? (LINK)
- What Is Dogecoin? (DOGE)
- What Is Litecoin? (LTC)
- What Is Polkadot? (DOT)
- What Is Ripple? (XRP)
- What Is Stellar? (XLM)
- What Is Tether? (USDT)
Daria Uhlig contributed to the reporting for this article.
Data was compiled on June 1, 2022, and is subject to change.