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 22,000 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 last year’s 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.
Top 8 Cryptocurrency Investments in 2023
That said, these are eight top cryptocurrencies that could prove to be worthy of investment in 2023.
Cryptocurrency
Price MARKERT CAP
Bitcoin $16,654.71 $320.62 billion
Ethereum $1,209.91 $148.07 billion
Binance Coin$245.35 $39.24 billion
Cardano $0.2531 $8.74 billion
Polygon $0.776 $6.78 billion
Terra (LUNA)$1.29 $164.87 million
Avalanche $11.36 $3.54 billion
Chainlink $5.60 $2.84 billion
Binance Coin$245.35 $39.24 billion
Cardano $0.2531 $8.74 billion
Polygon $0.776 $6.78 billion
Terra (LUNA)$1.29 $164.87 million
Avalanche $11.36 $3.54 billion
Chainlink $5.60 $2.84 billion
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 are 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, through its partnership with OpenNode, allows merchants to settle transactions and convert payments to bitcoin. The larger banks have begun 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 last April.
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. Also, the investment firm VanEck seeks to establish a bitcoin exchange-traded fund. The Securities and Exchange Commission denied the company’s first application and has delayed rendering a decision on the company’s latest application. Information regarding the outcome has not yet been released.
A decision on another bitcoin spot ETF, this one from ARK 21Shares, has a Jan. 27 deadline.
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 was true in 2022, as bitcoin prices correlated to the Nasdaq, as CNBC reported, challenging previous assumptions that bitcoin would serve as a hedge against inflation.
Bitcoin also reacted strongly to the collapse of the FTX cryptocurrency exchange. And it’s likely that the dust hasn’t yet settled. Despite its push to establish a bitcoin ETF, VanEck recently predicted that bitcoin could lose another 35% or more in the first quarter of 2023 due to miner bankruptcies. However, United States Commodity Futures Trading Commission head Rostin Behnam called bitcoin the only cryptocurrency asset that can be considered a commodity in the wake of the FTX collapse, Cointelegraph reported.
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.
Another reason to reconsider investing in bitcoin is its price. With a single bitcoin costing over $20,000 prior to the FTX collapse and hovering around $16,000 since, 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 now that an upgrade nicknamed “The Merge” has fully deployed. The September 2022 upgrade shifted Ethereum to a proof-of-stake-based consensus that will reduce the number of coins and has rendered ethereum mining obsolete. The Merge has also drastically reduced Ethereum’s energy consumption.
Although ether doesn’t have the widespread acceptance bitcoin does, traditional companies are coming on board. 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
Although The Merge vastly improved Ethereum’s energy efficiency, it didn’t resolve slow transaction speeds or high gas fees. The platform 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. For improvement there, users must wait for Ethereum to implement “sharding,” which CoinDesk describes as being like adding lanes to a highway. The Ethereum.Org website says sharding could come as soon as this year.
Some have grown tired of waiting. The Dydx cryptocurrency derivatives exchange, for example, is moving to its own blockchain.
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.
One thing working in BNB’s favor is that Binance burns, or destroys, coins once per quarter. The most recent burn, which took place on Oct. 13, 2022, and reduced the coin supply by over 2 million tokens — nearly $600 million worth — didn’t affect prices in the short term, but managing the number of tokens can have a positive effect over time by creating scarcity. BNB has a total supply of 200 million coins, 80% of which are circulating.
It’s worth noting that Binance has taken a leading role in stabilizing the crypto industry following the collapse of the FTX exchange. It has devoted $1 billion to a recovery fund established to keep struggling players afloat, CNBC reported.
Risks of Investing In Binance Coin
Although binance coin’s position as the native cryptocurrency on the world’s largest exchange “legitimizes” it in some respects, it also makes the currency especially vulnerable to regulatory issues — issues likely to heat up as a result of the FTX bankruptcy. BNB lost 7.3% of its value in June when news broke of a Securities and Exchange Commission investigation into whether Binance followed proper procedures in its 2017 initial coin offering, Fortune reported.
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.
In 2021, Cardano launched a “hard fork,” an upgrade that increased functionality — in this case, enabling smart contract deployment. Another hard fork, this one called Vasil, launched in September 2022 and should improve the Cardano blockchain’s scalability, Mint reported.
Cardano recently launched a test version of a platform called AdaSwap where developers can build decentralized finance apps. AdaSwap could elevate Cardano’s status as a Web3 network and drive up the price of its coin. While the coin is No. 9 in terms of market value, Cardano’s non-fungible-token protocol is the world’s third largest, according to Forbes.
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.
Advice
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.
In July 2022, Polygon announced in a press release that it had launched Polygon zkEVM, “the first Ethereum-equivalent scaling solution that works seamlessly with all existing smart contracts, developer tools and wallets.” It does this with a type of cryptography called zero-knowledge proofs, which lower transaction costs and increase throughput.
Polygon currently hosts over 37,000 decentralized applications, including some from companies like Meta and Stripe — about a 400% increase since the beginning of the year, according to a tweet from the Polygon Twitter account. In addition, Polygon fully supports the tether stablecoin, which could contribute to the network’s future growth. Another plus is its investment in carbon neutrality, which occasionally has prompted price rallies.
Risks of Investing In Polygon
Polygon disclosed in late 2021 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 using the symbol LUNC, stabilized the prices of the blockchain’s stablecoins.
However, terra crashed and burned in early May 2022, spurred by stablecoin volatility and overall skittishness in cryptocurrency markets, halting the cryptocurrency’s strong year and driving some crypto platforms into bankruptcy.
After the crash, Terra rebranded the original network as Terra Classic (LUNC) and launched Terra 2.0 (LUNA), a new blockchain without an algorithmic stablecoin, in an effort to stabilize the Terra ecosystem and help investors who lost money recoup some of their investment. LUNC coins trade separately from the LUNA coins that come with Terra 2.0.
Risks of Investing In Terra 2.0
The launch of Terra 2.0 was a controversial move, and industry watchers are undecided over its long-term viability. That said, several new projects have already launched on the new network, and its native coin may be worth watching if you have a high tolerance for risk.
Good To Know
LUNC wasn’t Terraform Labs CEO Do Kwon’s first failed stablecoin. Basis cash, a coin he launched on Ethereum in 2020, never reached parity with the U.S. Dollar, CoinDesk reported. Its price was about $0.004 on Jan. 3.
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.
Avalanche’s three individual blockchains can validate transactions independently. This makes Avalanche scalable and 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 last spring that avalanche had 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 $10.65 to a high of $109.12 over the past year. As of Jan. 3, the coin trades for $11.36.
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.
Chainlink is also the choice for the new inflation index from decentralized finance company Truflation, built to serve as an alternative to the Consumer Price Index. Whereas the CPI measures inflation using survey data, Truflation’s index uses 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.
Chainlink Labs’ advisors include former Google CEO Eric Schmidt, DocuSign founder Tom Gonser and former LinkedIn CEO Jeff Weiner.
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 has dropped dropped over 75% in the past year.
Advice
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.
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.
Track Record
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.
Technology
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.
Adoption Rate
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.
Final Take
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?
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