Cryptocurrency embodies a form of digital currency that operates independently of centralized authorities such as governments. Its foundation lies in blockchain technology, with Bitcoin reigning supreme as the foremost contender. The surge in popularity of digital currencies has given rise to an ever-expanding array of alternatives, with a staggering count of over 23,000 cryptocurrencies currently available in the market.
While cryptocurrency can certainly facilitate transactions, a majority of individuals regard it as a vehicle for long-term investment. Nevertheless, the inherent volatility associated with this realm renders cryptocurrency investment a precarious endeavor, as evidenced by the precipitous decline experienced by various cryptocurrencies, including stablecoins that are pegged to the value of the U.S. dollar, in the previous year. It is of utmost importance to equip oneself with a comprehensive understanding of the intricacies involved before embarking on a purchase. With that being said, here are eight prominent cryptocurrencies that have the potential to be valuable investment options in 2023.
Chainlink (LINK)
Chainlink leverages a decentralized oracle network to facilitate the secure and tamper-proof exchange of information between blockchain systems and external data feeds, events, and payment methods. The ultimate objective of this approach is to enable smart contracts to become the leading form of digital payments in the market, as stated by CoinMarketCap.
Chainlink benefits from its strategic partnership with Google, where the tech giant employs Chainlink’s protocol to connect users to its cloud services, as reported by Benzinga.
Moreover, Chainlink is the preferred option for the new inflation index from Truflation, a decentralized finance firm aiming to provide an alternative to the Consumer Price Index. Unlike the CPI, which relies on survey data, Truflation’s index draws from a vast and dynamic pool of 10 million data points, sourced from over 40 different channels, to deliver a more objective, transparent, and accurate inflation measurement.
Chainlink Labs boasts an impressive panel of advisors, including former Google CEO Eric Schmidt, Tom Gonser, the founder of DocuSign, and Jeff Weiner, the former CEO of LinkedIn.
Chainlink Investing Risks
Despite the demonstrated usefulness of Chainlink and the backing it receives from prominent stakeholders, the cryptocurrency has encountered similar levels of unpredictability as other digital currencies. Over the course of the past year, its value has declined by nearly 39%, although it has exhibited positive growth thus far in 2023.
Avalanche (AVAX)
Avalanche stands as a fresh blockchain technology, classified as a “layer one” blockchain that advances the foundation protocol to enable greater scalability, according to Binance. Ava Labs founded it as a challenger to Ethereum, working with computer scientists at Cornell University, among whom is Emin Gün Sirer, a former professor who boasts extensive experience in cryptographic research, according to CoinMarketCap.
Avalanche houses three independent blockchains that can verify transactions on their own, and this scalability grants it the ability to accommodate high volumes of transactions, with a capacity of up to 6,500 transactions per second. Consequently, it has gained popularity among various Ethereum ventures, as reported by U.S. News.
Regarding the cryptocurrency itself, Bloomberg disclosed last spring that Avalanche had dethroned Ether as the reserve currency for Terra’s UST stablecoin. Luna Foundation Guard, the nonprofit organization that supports Terra, aimed to acquire $100 million worth of Avalanche to fulfill that objective.
In 2020, AVAX initiated its trading activities in a 24-hour initial coin offering. Over the past year, its value has fluctuated, reaching a minimum of $10.65 and a maximum of $69.35. As of May 1, the coin is trading at $16.96.
Avalanche Investing Risks
Sirer introduced the cryptocurrency through a white paper in 2018, and it was officially launched in 2020. Due to its brief existence, Avalanche lacks a track record for comparison, which increases the investment risk for prospective buyers.
Terra 2.0 (LUNA)
Terra Classic blockchain utilized stablecoins, which are digital currencies pegged to traditional fiat currencies like the U.S. dollar, South Korean won, and the International Monetary Fund’s Special Drawing Rights, to facilitate global payment systems, as stated by CoinMarketCap. The blockchain’s stablecoins were supported and maintained by its native coin, now denoted as LUNC, which played a crucial role in stabilizing the stablecoin prices.
However, Terra faced a severe setback in early May 2022, primarily triggered by the volatility of stablecoins and the overall apprehension prevailing in the cryptocurrency markets. This sudden downturn halted the blockchain’s promising trajectory, leading to the collapse of several crypto platforms and leaving investors in distress.
In response to the crisis, Terra underwent a rebranding process, relaunching the original network as Terra Classic (LUNC). Additionally, they introduced Terra 2.0 (LUNA), a new blockchain that abandoned the algorithmic stablecoin concept. The purpose behind this transformation was to restore stability to the Terra ecosystem and offer a chance for investors to recover a portion of their lost investments. It’s important to note that LUNC coins now trade separately from the LUNA coins associated with Terra 2.0.
Terra 2.0 Investing Risks
The introduction of Terra 2.0 sparked controversy and left industry experts divided on its prospects for long-term success. Nevertheless, despite the uncertainties, several new ventures have already emerged on the upgraded network, and those willing to embrace a higher level of risk might find it worthwhile to monitor the performance of its native coin.
Polygon (MATIC)
Polygon, a multi-chain system, was developed by a team who made substantial contributions to the Ethereum blockchain platform. Polygon is purposed for the augmentation of Ethereum’s infrastructure development and scaling, with the aim of enhancing transaction and verification speed, according to CoinMarketCap. As a “layer two” solution, it has been endorsed by both the Binance and Coinbase cryptocurrency exchanges. MATIC, its token, is employed for payment services, transaction fees, and as a settlement currency.
In July 2022, Polygon, through a press release, proclaimed the advent of Polygon zkEVM, a solution that is equivalent to Ethereum in its scaling potentiality, one that works impeccably with all pre-existing smart contracts, developer tools, and wallets. This is achieved by utilizing zero-knowledge proofs, a cryptographic method that curtails transaction costs while upscaling throughput.
Polygon presently hosts over 53,000 decentralized applications as of October 2022, including some from distinguished companies like Meta and Stripe. This represents a remarkable 800% increment since the onset of 2022, according to a tweet from the Polygon Twitter account. Furthermore, Polygon is fully supportive of the tether stablecoin, which is expected to contribute significantly to the network’s future growth. Its investment in carbon neutrality is another feather in its cap, occasionally sparking price rallies.
Polygon Investing Risks
Polygon’s layer-two solution aims to address the speed limitations of Ethereum. However, it is worth noting that Ethereum’s upcoming Merge upgrade holds the potential to deliver transaction speeds even faster than what Polygon currently offers. If this comes to fruition, it could render Polygon’s primary advantage obsolete.
Cardano (ADA)
The Cardano network has garnered investor interest due to its smaller ecological footprint, presenting several advantages. Completing a transaction on Cardano requires less energy compared to larger networks like Bitcoin. As a result, transactions on Cardano are faster and more cost-effective.
In 2021, Cardano implemented a “hard fork” upgrade that enhanced its functionality, particularly enabling the deployment of smart contracts. Another notable hard fork, named Vasil, was launched in September 2022, with the goal of improving Cardano’s scalability, as reported by Mint.
Cardano recently introduced a test version of a platform called AdaSwap, which serves as a platform for developers to construct decentralized finance applications. The advent of AdaSwap has the potential to elevate Cardano’s standing as a Web3 network and could contribute to an increase in the value of its native coin. While Cardano’s coin ranks seventh in terms of market value, its non-fungible-token protocol is recognized as the world’s third largest, as stated by Forbes.
Cardano Investing Risks
Despite its superior network and the added capabilities offered by smart contracts, Cardano may face challenges in competing with larger cryptocurrencies. The limited number of adopters translates to fewer developers, which may deter many investors who value a high adoption rate.
Cardano has ambitious initiatives, including the launch of an incubator aimed at unlocking Africa’s potential as a significant economy. However, it remains uncertain whether Cardano will be able to fulfill its promises and achieve the envisioned outcomes.
BNB (BNB)
Due to its track record, Binance Coin (BNB), formerly known as Binance Coin, has established itself as a comparatively stable investment option over time. As the native token of Binance, the world’s largest cryptocurrency exchange, as well as Binance.US, the platform designated for U.S. residents, BNB offers extensive functionality and has enjoyed success in various Binance sub-projects. However, it is important to note that BNB remains a highly volatile investment.
One advantageous aspect of BNB is Binance’s regular coin burns, where a portion of the tokens is intentionally destroyed on a quarterly basis. In the most recent burn, reported by Binance on April 14, over 2 million tokens, equivalent to approximately $676.74 million, were removed from circulation. While this did not have an immediate impact on prices, managing the token supply can have a positive long-term effect by creating scarcity. Currently, the total supply of BNB stands at 155,862,572 tokens, reduced from the initial 200,000,000 tokens.
It is worth highlighting that Binance has taken a proactive role in stabilizing the cryptocurrency industry, particularly in the wake of the FTX exchange collapse. According to CNBC, Binance has committed $1 billion to a recovery fund aimed at supporting struggling participants within the industry.
BNB Investing Risks
While BNB’s status as the native cryptocurrency on the largest global exchange provides it with a certain level of legitimacy, it also exposes the currency to heightened vulnerability concerning regulatory matters. These concerns are expected to intensify following the FTX bankruptcy, which may have repercussions throughout the industry. A notable instance illustrating this vulnerability occurred in June 2022 when news broke of a Securities and Exchange Commission investigation into Binance’s compliance with appropriate procedures during its initial coin offering in 2017. As a result, BNB experienced a decline of 7.3% in value, as reported by Fortune.
Ethereum (ETH)
Ethereum is a network that empowers developers to create their own cryptocurrencies and deploy smart contracts utilizing its infrastructure. While Ethereum’s value may still lag behind that of Bitcoin, it maintains a significant lead over its competitors.
Despite entering the market later than some other cryptocurrencies, Ethereum has surpassed expectations due to its distinctive technology. It currently stands as the most popular blockchain platform and the second-largest cryptocurrency after Bitcoin.
With the successful deployment of an upgrade known as “The Merge,” Ethereum is poised to gain further ground. This September 2022 upgrade transitioned Ethereum to a proof-of-stake consensus mechanism, reducing the overall coin supply and rendering traditional Ethereum mining obsolete. Furthermore, The Merge has led to a substantial decrease in Ethereum’s energy consumption.
Although Ether, the native cryptocurrency of Ethereum, may not enjoy the same widespread acceptance as Bitcoin, traditional companies are beginning to embrace it. Fidelity, for instance, is expanding its technical workforce to establish the necessary infrastructure for offering Ethereum custody and trading services to its customers, as reported by The Wall Street Journal.
Ethereum Investing Risks
Despite the significant improvement in energy efficiency brought about by The Merge upgrade, Ethereum still grapples with challenges related to slow transaction speeds and high gas fees. Presently, the platform operates with a single “lane” for transaction processing, which can result in delays during periods of network congestion.
Transaction fees on Ethereum remain notably high. To address this issue, the implementation of “danksharding” is eagerly anticipated. However, achieving this goal necessitates multiple upgrades. As outlined on the Ethereum development site, the intermediate step of proto-sharding will leverage rollups to reduce costs. Rollups consolidate numerous transactions into a single transaction on the layer one, potentially leading to a fee reduction of up to 100 times.
The prolonged wait for scalability improvements has led some projects to seek alternatives. For instance, the Dydx cryptocurrency derivatives exchange has decided to migrate to its own blockchain, reflecting a growing impatience within the Ethereum ecosystem.
Bitcoin (BTC)
Bitcoin holds the distinction of being the longest-standing cryptocurrency, which has contributed to its leadership position in the market. Its price and market capitalization far surpass those of any other crypto investment options.
The widespread acceptance of Bitcoin as a form of payment by numerous businesses further solidifies its status as a sound investment choice. Major players like Visa facilitate transactions involving Bitcoin, and after a temporary hiatus from cryptocurrency, Stripe, in collaboration with OpenNode, enables merchants to settle transactions and convert payments into Bitcoin. Even larger banks have begun incorporating Bitcoin transactions into their offerings.
While Tesla’s acceptance of Bitcoin was brief, there is a possibility of reconsideration if Bitcoin mining becomes more environmentally friendly. In a step towards achieving this goal, Blockstream and Block, formerly known as Square, have launched a Bitcoin mining project in Texas that relies fully on Tesla’s solar array and Megapack battery, as reported by CNBC in April 2022.
Bitcoin received a significant boost in May 2022 when the Luna Foundation Guard announced its intention to provide $1.5 billion in loans denominated in Bitcoin and Terra USD to stabilize the latter, according to Fortune. Additionally, there have been efforts by at least two investment companies to establish spot Bitcoin exchange-traded funds (ETFs). However, the Securities and Exchange Commission has thus far rejected their applications.
Risks of Investing In Bitcoin
The value of Bitcoin is known for its significant fluctuations, with prices often experiencing fluctuations of thousands of dollars within a single month. This trend was particularly evident in 2022 when Bitcoin prices exhibited a correlation with the Nasdaq, challenging previous assumptions that Bitcoin could serve as a hedge against inflation, as reported by CNBC.
Bitcoin’s price was also highly responsive to the collapse of the FTX cryptocurrency exchange, and the aftermath of this event is still unfolding. However, Rostin Behnam, the head of the United States Commodity Futures Trading Commission, classified Bitcoin as the only cryptocurrency asset that can be considered a commodity in light of the FTX collapse, according to Cointelegraph. Since the beginning of the year, Bitcoin has seen a price increase of over 72%.
If such wild price fluctuations make you apprehensive, it may be advisable to avoid investing in Bitcoin. However, if you view cryptocurrency as a potentially sound long-term investment, these fluctuations should not be overly concerning.
Another aspect to consider when contemplating Bitcoin investment is its price. With the cost of a single Bitcoin exceeding $28,000, the majority of individuals may find it challenging to afford whole Bitcoins. This factor could be viewed as a drawback for investors who prefer to avoid purchasing fractions of a Bitcoin.
The Best Cryptocurrency Options, Rated
If you conduct a brief online search, you will come across numerous suggestions on investing in cryptocurrency. When selecting the top eight options, the following factors were taken into account.
Adoption Rate
It behooves thee to inquire how many individuals have invested in the particular cryptocurrency thou art contemplating. A significant degree of adoption indicates that the aforementioned cryptocurrency boasts superior liquidity. In the future, transactions, divestments, or purchases shall prove to be effortless.
Technology
In terms of usability and security, how does the platform fare when compared to its counterparts? Primarily, one should assess the speed at which transactions are executed. The network ought to possess the capacity to handle transactional influx without impediment.
Additionally, ensuring the security of one’s investment is paramount. The majority of cryptocurrencies employ blockchain technology, rendering all transactions transparent and readily traceable. Nevertheless, it is important to note that blockchain technology does not inherently render it more challenging for malicious actors to abscond with one’s cryptocurrency. However, it does facilitate the tracking of investments, thereby enabling the potential recovery of funds in the aftermath of fraudulent activities.
Track Record
In retrospect of the company’s tenure in the business sphere, how has its performance been perceived? The presence of price stability may be indicative of a favorable trajectory. Furthermore, the phenomenon of the cryptocurrency garnering increased recognition and accruing greater value over time would be deemed even more auspicious.
Longevity
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.
Bottom Line
There exists no doubt that cryptocurrencies have established their permanence in the financial landscape. However, the question arises as to where the optimal destination lies for investing one’s financial resources within this market.
Whilst discerning the most suitable cryptocurrency investment for thyself, it is imperative to consider the following factors:
- The expeditiousness with which transactions are concluded.
- The associated fees pertaining to transactions.
- The feasibility of utilizing the cryptocurrency for customary purchases and interbank transfers.
Should thy sole objective be investment without active participation within the network, it is crucial to recognize that cryptocurrencies do not espouse a “get-rich-quick” paradigm. Instead, it is advisable to perceive them as long-term investments, warranting thoughtful consideration and strategic foresight.
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I'm Carina, a passionate crypto trader, analyst, and enthusiast. With years of experience in the thrilling world of cryptocurrency, I have dedicated my time to understanding the complexities and trends of this ever-evolving industry.
Through my expertise, I strive to empower individuals with the knowledge and tools they need to navigate the exciting realm of digital assets. Whether you're a seasoned investor or a curious beginner, I'm here to share valuable insights, practical tips, and comprehensive analyses to help you make informed decisions in the crypto space.
