Despite the recent almost 50% pullback from its highs, Bitcoin and other cryptocurrencies are still catching the fancy of investors. Macroeconomic conditions like inflation and full employment are shifty rapidly and are opening up what could be an opportunity in Bitcoin, Ethereum and other cryptocurrencies. While regulators in Washington, D.C. are now taking a close look at this asset group, one doesn’t have to see this as a deleterious event. Wall Street and Main Street want some definition and regulation before they are ready to fully jump in. According to Mason Nystrom, a senior research analyst at crypto data company Messari, “The exciting part of 2022 is that crypto is no longer at this point in time where it will have a single narrative.” The question of whether cryptocurrency as an asset class is here to stay is certainly debatable, but if you are of the mindset that we are only in its infancy, then let’s take a look at 4 cryptocurrencies that should be in your portfolio this year.
If you can’t make a case for Bitcoin as an investment then you might as well forget about the rest of the alt crypto coins. But I think a case can be made. If there is such a thing as a blue chip cryptocurrency Bitcoin is obviously it. Why is that?
- First ever crypto currency. While first is not always the best, it probably is in this case.
- First regulated crypto futures contact. Bitcoin futures are offered and regulated by the CME Group, bringing this asset into the mainstream for both speculating and hedging.
- First crypto to be on the balance sheet of an S&P 500 company. Remember that Elon Musk and Tesla purchased approximately $1.5 billion of Bitcoin in February of 2021 when it was trading at roughly $39,000.
BTC/USDT weekly chart. Source: TradingView
If Bitcoin is analogous to gold then Ethereum can be said to be silver. Ethereum hosts the Ether currency which at present prices makes it only second to Bitcoin with a market capitalization of approximately $379 billion. The most widely used blockchain in existence, Ethereum is central to exciting and emerging areas like decentralized finance, or DeFi, smart contracts, and nonfungible tokens, or NFT’s. Ethereum’s biggest shortcoming is its proof-of-work protocol, which makes transactions energy-inefficient and expensive, but a shift to the faster and cheaper proof-of-stake protocol is underway.
Ethereum has a number of things going for it. As one of the oldest projects in the market, Ethereum’s been behind every significant trend in crypto. The first was the initial coin offering (ICO) boom. ICO’s were a godsend for companies in the crypto economy. Previously, it was difficult for them to raise capital and fund development, despite the interest. But ICO’s provided an entirely new way to raise money and crowdfund. The second major trend Ethereum hit upon was decentralized finance, or DeFi for short. DeFi is a collective term for financial products and services that are accessible to anyone who can use the blockchain. Currently, the TVL, or total locked value on Ethereum is a staggering $100 billion. Last but not least, Ethereum is a major part of the current trend in NFT’s or non-fungible tokens. All of these impetuses bode well for the future of Ethereum.
ETH/USDT weekly chart. Source: TradingView
Polygon is a decentralized Ethereum scaling platform that enables developers to build scalable user-friendly dApps with low transaction fees without ever sacrificing on security. To understand Polygon, think of a highway system in a major city. As its population grows, traffic congestion gets worse. So it has to build more lanes and more roads to improve usage for its citizens. That’s what Polygon does for Ethereum. It can address Ethereum’s growing pains, which makes it a key contributor to Ethereum as it prepares for the Merge. Polygon also brings key verticals to the Ethereum blockchain party. The first is DeFi. Polygon launched a $150 million DeFi project in April of 2021 to help it grow this niche. The second vertical is gaming and NFT’s. Polygon launched Polygon Studios with a $100 million investment in July of 2021. With these initiatives and its DeFi fund, Polygon can continue to add users and dApps on its platform, which should ultimately make it more valuable.
MATIC/USDT weekly chart. Source: TradingView
Avalanche is an open, programmable smart contracts platform for decentralized applications, and was founded by Emin Gun Sirer of Cornell University. While I’m not usually fond of academics in business, Avalanche is an impressive open platform for programmable finance and the digitization of assets. Avalanche’s unique design makes it fast, cheap, scalable, and decentralized, which makes it ripe for enterprise opportunities. Since launching last year, Avalanche has seen rapid adoption, with 70 projects building on its platform. Today, that number is nearing 350. According to Sam Bankman-Fried, the 29-year-old co-founder and CEO of cryptocurrency exchange FTX, whose net worth is estimated at $22.5 billion, “Avalanche holds some explosive promise in 2022. I think that there’s a world in which it gets absolutely huge.”
Like other cryptocurrencies, holding Avalanche tokens is not for the faint of heart. AVAX is extremely volatile. It has a 52-week low of $9.34 and a 52-week high of $146.22, and is currently trading at about $85. When you put it all together, one could see rapid adoption of the Avalanche ecosystem over 2022, and that could propel the AVAX token price higher.
AVAX/USDT weekly chart. Source: TradingView
