Digital money that isn’t controlled by a central authority, like a government, is called cryptocurrency. Instead, it is built on the most widely used blockchain technology, Bitcoin. A growing number of options are becoming available as digital currency continues to gain popularity on Wall Street. Over 20,000 cryptocurrencies are available on the market right now.
Although you can buy things with cryptocurrencies, most people view them as long-term investments. The recent freefall among cryptocurrencies, including stable coins pegged to the U.S. dollar, illustrates how volatile cryptocurrencies make investing in them risky. Before you invest, it’s critical to understand what you’re getting into.
Best Cryptocurrency for Investment in 2022
1. Bitcoin (BTC)
The oldest cryptocurrency, Bitcoin, has been around the longest. With a price and market cap that are significantly higher than any other cryptocurrency investment option, it is clear why it is the market leader.
Bitcoin is a wise investment because so many companies already accept it as payment. For instance, Visa accepts bitcoin transactions. Additionally, after a four-year absence from cryptocurrencies, Stripe will now allow users to accept bitcoin payments. Even the bigger banks have started to include bitcoin transactions in their services.
Tesla only briefly accepted bitcoin, but if its mining becomes more environmentally friendly, it might do so once more. Blockstream and Block, formerly known as Square, are starting a bitcoin mine in Texas that will be entirely powered by Tesla’s solar panel and Megapack battery, according to a report from CNBC on April 8. This is a step in the right direction.
The Luna Foundation Guard announced in May that it would make $1.5 billion in loans with the currencies of bitcoin and terra USD to stabilize the latter, giving bitcoin another boost, according to Fortune. VanEck, a financial services company, wants to launch a bitcoin exchange-traded fund, but the Securities and Exchange Commission rejected its initial application.
Risk of BTC Investment
The price of bitcoin frequently varies. During any given month, the price could change by thousands of dollars. That has undoubtedly been the case so far this year as bitcoin prices have correlated with the Nasdaq, contrary to earlier expectations that bitcoin would act as an inflation hedge, as CNBC reported.
You might want to stay away from bitcoin if erratic fluctuations like these give you the willies. Otherwise, these fluctuations shouldn’t be too worrying as long as you remember that cryptocurrencies may be a wise long-term investment.
The cost of bitcoin is another deterrent to investing in it. Since a single bitcoin costs more than $19,000, most people are unable to purchase entire bitcoins. This is a drawback for investors who want to avoid purchasing a fraction of a bitcoin.
Developers can build their own cryptocurrency on the Ethereum network and use it to deploy smart contracts. Ethereum is far ahead of its rivals even though its value is far behind that of bitcoin.
It launched years after some other cryptocurrencies, but thanks to its distinctive technology, it has far outperformed its position in the market. It is currently the second-largest cryptocurrency after bitcoin and the most widely used blockchain.
It has a chance to advance even further once an upgrade known as “The Merge” is fully implemented. The August upgrade will change Ethereum to a proof-of-stake consensus, which will decrease the number of coins and make mining obsolete. The Merge is anticipated to significantly lower Ethereum’s energy usage.
Even though ether isn’t as well-known as bitcoin, more conventional businesses are embracing it. According to The Wall Street Journal, Fidelity, for instance, is expanding its tech workforce to build the infrastructure required to provide its customers with Ethereum custody and trading services.
Investment Risk in Ethereum
The Ethereum platform uses blockchain technology, but there is only one “lane” for transactions at the moment. When the network is busy, this may cause transactions to process more slowly. The cost of transactions is also high. Due to the high demand for block space, the price of “gas,” or the amount of ether required to complete a transaction on the Ethereum blockchain, increased 13% in March, according to CoinDesk. Even though The Merge will fix those problems, some people are sick of waiting. As an illustration, the Dydx cryptocurrency derivatives exchange is migrating to its own blockchain.
Another problem has been security. For instance, a hack in 2016 that exploited a security hole resulted in the loss of ether valued at more than $50 million. And in May, the network encountered a security problem as a result of the debut of a brand-new blockchain that coexists with Ethereum’s mainnet. Users weren’t impacted because that blockchain is on a test network. The blockchain is anticipated to become more secure after the final Merge upgrade.
3. Binance Coin (BNB)
After years of, at least by cryptocurrency standards, relatively stable prices, binance coin took off at the start of 2021, rising from about $38 on that year’s Jan. 1 to an all-time high of $683 in May.
Binance Coin has established itself as one of the more stable investment options. According to Coin, investors who engage in a lot of trading should be aware that recently, Binance temporarily suspended deposits and withdrawals for some networks, including Polygon and Solana, in order to implement upgrades. The most recent one, which happened on April 8, had no impact on airdrops, which are rewards based on a portion of users’ deposits.
MarketCap, Binance is the largest cryptocurrency exchange in the world. On Binance.US, the version that U.S. citizens must use, it is the native token. The coin’s extensive functionality and its success in Binance’s subsidiary projects notwithstanding, binance coin remains a highly erratic investment.
Investment Risk in n Binance Coin
In some ways, binance coin’s status as the default cryptocurrency on the biggest exchange in the world “legitimises” it, but it also makes the coin particularly susceptible to regulatory concerns. When news of a Securities and Exchange Commission investigation into whether Binance followed proper procedures in its 2017 initial coin offering broke last month, BNB lost 7.3 percent of its value, according to Fortune.
4. Cardano (ADA)
Investors are drawn to the Cardano network’s smaller footprint for a variety of reasons. Compared to a bigger network like Bitcoin, Cardano requires less energy to complete a transaction. Transactions are therefore quicker and more affordable.
A “hard fork” that increased functionality—in this case, enabling the deployment of smart contracts—was introduced by Cardano last year. And more recently, it unveiled a test version of the AdaSwap platform, on which programmers can create decentralised financial apps. Cardano’s status as a Web3 network may be enhanced by AdaSwap, which may also increase the value of its coin.
Investment Risk in Cardano
Cardano might not be able to compete with more established cryptocurrencies, despite having a better network and more functionality provided by smart contracts. Less adopters translate to fewer developers. Most investors who want to see a high adoption rate don’t find this appealing.
It will be interesting to see if the platform can live up to its lofty goals, which include starting an incubator to help Africa realize its potential as a major economic power.
5. Polygon (MATIC)
A development team that made significant contributions to the Ethereum blockchain platform was responsible for the creation of Polygon. According to CoinMarketCap, Polygon is intended for Ethereum scaling and infrastructure development. It expands Ethereum into a multi-chain system as a “layer two” solution, enhancing transaction and verification speed.
The cryptocurrency exchanges Binance and Coinbase support Polygon. Its token, MATIC, is employed for settlement currency, transaction fees, and payment services.
According to AMB Crypto on April 9, new developments that could boost MATIC prices include Zo World, a decentralised travel project, launching its non-fungible token and other digital assets on Polygon. Real estate in the Zo Metaverse is also acquired by those who purchase those assets. More significantly, according to CoinTelegraph, an Indian state government is using Polygon to issue caste certificates in order to distribute government benefits to over 1 million low-income citizens.
According to a blog post on Polygon, the company now hosts 19,000 decentralized applications, an increase of about 600% from last October. In addition, Polygon fully endorses the tether stablecoin, which might help the network expand in the future. Its investment in carbon neutrality is another benefit, which recently spurred price increases.
Investment Risk in Polygon
According to CoinDesk, Polygon revealed late last year that it had patched a vulnerability that put about $20 million worth of its coins at risk. The exploit was found by a hacker, who alerted Polygon, who installed a fix two days later. However, over 800,000 tokens had already been taken by black-hat hackers, leaving Polygon liable for about $1.4 million.
Best Cryptocurrency for Investment in 2022
6. Avalanche (Avax)
According to Binance, Avalanche is a brand-new “layer one” blockchain that enhances the foundational protocol to increase system scalability. According to CoinMarketCap, it was founded as an Ethereum rival by Ava Labs and computer scientists at Cornell University, one of whom, former professor Emin Gün Sirer, has a long history in cryptographic research.
Unlike Ethereum, where each transaction must be validated by every node, Avalanche’s three distinct blockchains allow for independent transaction validation. As a result, Avalanche is more scalable and capable of handling high transaction volumes, up to 6,500 per second. It consequently enjoys rising popularity among Ethereum projects, according to U.S. News.
As for the coin itself, according to Bloomberg, avalanche prevailed over ether as Terra’s reserve currency for its own UST stablecoin on April 7. The nonprofit Luna Foundation Guard, which supports Terra, planned to buy $100 million worth of avalanche as part of that endeavour.
2020 saw the launch of a 24-hour initial coin offering for AVAX. Over the past year, its price has varied from a low of $9.34 to a high of $146.22. The price of the coin as of July 1 is $16.29.
Investment Risk in Avalanche
Through a white paper, Sirer presented the cryptocurrency in 2018. It was introduced in 2020. Avalanche is a riskier investment for potential buyers because it has such a brief history and no prior performance to compare it to.
Ranking the Best Options for Cryptocurrencies
You can find dozens of suggestions for how to invest in cryptocurrencies by conducting a quick online search. The following criteria were taken into account when selecting the top eight choices.
What is the age of the cryptocurrency? New cryptocurrencies aren’t immediately ruled out, but having prior performance data to compare with allows you to assess a company’s performance.
How has the business fared over the years it has been in operation? It’s a good sign if prices appear to be stable. Even better if you see that the cryptocurrency is gaining popularity and increasing in value over time.
How user-friendly and secure is the platform in comparison to others? The speed at which transactions take place should be your first point of inspection. Transaction traffic should be easily handled by the network.
Additionally, you want to guarantee the safety of your investment. Blockchain technology is used by the majority of cryptocurrencies, making all transactions transparent and simple to follow. The ability of hackers to steal your cryptocurrency may not necessarily be made more difficult by blockchain technology. It does make it simpler to keep track of your investment so that it can be recovered rather than lost as a result of fraud.
How many investors are there in the cryptocurrency you’re thinking about? When adoption is high, it usually indicates that the cryptocurrency has better liquidity. Future trading, selling, and spending will be simpler.