1. Bitcoin (BTC)
The oldest cryptocurrency, Bitcoin, has been around for the longest. With a price and market size that are significantly larger than any other cryptocurrency investment alternatives, it is simple to understand why it is the leader.
Bitcoin is a wise investment because so many companies currently accept it as payment. For instance, Visa accepts bitcoin transactions. Also, through its collaboration with OpenNode, Stripe now enables merchants to settle transactions and convert payments to bitcoin after a four-year absence from cryptocurrencies. Even the bigger banks have started to include bitcoin transactions in their services.
Tesla only briefly took bitcoin, but if its mining becomes more ecologically friendly, it might do so once again. Blockstream and Block, formerly known as Square, are starting a bitcoin mine in Texas that will be entirely powered by Tesla’s solar array and Megapack battery, according to a report from CNBC in April. This is a step in the right direction.
The Luna Foundation Guard stated in May that it will issue $1.5 billion in loans with the currencies of bitcoin and terra USD to stabilize the latter, giving bitcoin another boost, according to Fortune. Moreover, the investing company VanEck plans to launch an exchange-traded fund for bitcoin. The Securities and Exchange Commission has delayed making a decision on the company’s most recent application and rejected the company’s initial application. A proposal by ARK 21Shares to introduce a bitcoin spot ETF was turned down by the SEC in January.
Risks of Investing In Bitcoin
The price of bitcoin frequently varies. On any given month, the price could change by thousands of dollars. That was unquestionably the case in 2022, when bitcoin prices showed a correlation to the Nasdaq, contrary to earlier expectations that it would act as an inflation hedge.
In addition, Bitcoin had a strong response to the demise of the FTX cryptocurrency exchange. And it’s likely that there is still a lot of haze. VanEck recently forecasted that bitcoin might lose another 35% or more in the first quarter of 2023 as a result of miner bankruptcies, despite its efforts to develop a bitcoin ETF. Yet, according to Rostin Behnam, the president of the United States Commodities Futures Trading Commission, bitcoin is the only cryptocurrency asset that can be regarded as a commodity in the wake of the FTX crash, and the coin is up about 40% so far in 2019.
You might want to stay away from bitcoin if erratic changes like this give you the willies. Otherwise, these changes shouldn’t be too worrying as long as you remember that cryptocurrencies may be a prudent long-term investment.
The cost of bitcoin is another deterrent to investing in it. Most people cannot afford to purchase entire bitcoins because each one costs over $23,000. This is a drawback for investors who want to avoid purchasing a fraction of a bitcoin.
2. Ethereum (ETH)
Developers can build their own cryptocurrency on the Ethereum network and use it to implement smart contracts. Ethereum is significantly ahead of its rivals even though its valuation is much 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 presently the second-largest cryptocurrency behind bitcoin and the most widely used blockchain.
With the full deployment of an upgrade known as “The Merge,” it stands to advance even further. Ethereum was upgraded in September 2022 to a proof-of-stake consensus, which will decrease the number of coins in circulation and make mining Ethereum obsolete. The Merging significantly decreased Ethereum’s energy usage.
Even while 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 IT team to build the infrastructure required to provide its customers with ethereum custody and trading services.
Risks of Investing In Ethereum
The Merge significantly increased Ethereum’s energy efficiency, but it didn’t address the issue of sluggish transaction times or high gas costs. There is only one “lane” available on the platform right now for transactions. When the network is busy, this may cause transactions to process more slowly. The cost of transactions is likewise considerable. Users must wait for Ethereum to implement “sharding,” which CoinDesk compares to adding lanes to a freeway, before they can make improvements there. According to the Ethereum.org website, sharding might happen this year.
Some people are sick of waiting. As an illustration, the Dydx cryptocurrency derivatives exchange is migrating to its own blockchain.
3. Binance Coin (BNB)
Binance Coin has established itself as one of the most stable investment options due to its performance throughout time. It is the native token on both Binance.US, the version that residents of the United States must use, and Binance, the largest cryptocurrency exchange in the world. The coin’s vast functionality and its success in Binance’s subsidiary projects notwithstanding, binance coin remains a very erratic investment.
The fact that Binance burns, or destroys, currencies once every three months, is one factor in BNB’s favor. Managing the quantity of tokens can have a positive impact over time by establishing scarcity. The most recent burn, which Binance revealed on Jan. 17, cut the currency supply by almost 2 million tokens, or nearly $600 million worth. 200 million BNB coins are available overall, with 79% of those coins in circulation.
It’s important to note that Binance has taken the lead in stabilizing the cryptocurrency market in the wake of the FTX exchange’s failure. According to CNBC, it has contributed $1 billion to a recovery fund set up to help struggling players stay afloat.
Risks of Investing In Binance Coin
Although being the original cryptocurrency on the biggest exchange in the world “legitimizes” binance coin in certain ways, it also makes the coin particularly exposed to regulatory concerns, which are expected to intensify as a result of the FTX bankruptcy. When news of a Securities and Exchange Commission inquiry into whether Binance followed correct processes in its 2017 initial coin offering leaked in June 2022, BNB fell 7.3% of its value, according to Fortune.
4. Cardano (ADA)
Investors are drawn to the Cardano network’s limited footprint for a variety of reasons. Compared to a bigger network like Bitcoin, Cardano requires less energy to conduct a transaction. Transactions are therefore quicker and more affordable.
Cardano introduced a “hard fork” in 2021, an upgrade that boosted functionality, in this case permitting the implementation of smart contracts. According to Mint, a new hard fork dubbed Vasil was introduced in September 2022 and should increase the Cardano blockchain’s scalability.
AdaSwap is a framework that Cardano just made available in test form so that programmers can create decentralized finance apps. Cardano’s standing as a Web3 network may be enhanced through AdaSwap, which may also increase the value of its coin. According to Forbes, Cardano’s non-fungible-token protocol is the third largest in the world, even if the coin is ranked No. 8 in terms of market value.
Risks of Investing In Cardano
Cardano could not be able to compete with other established cryptocurrencies, despite having a superior network and more functionality provided by smart contracts. Few adopters translate to fewer developers. Most investors, who prefer to see a high adoption rate, find this unattractive.
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 global economic power.
5. Polygon (MATIC)
A development team that made substantial 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 develops 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.
The Polygon zkEVM scaling solution, which is “the first Ethereum-equivalent scaling solution that works smoothly with all existing smart contracts, developer tools, and wallets,” was introduced in July 2022, according to a news statement from Polygon. Zero-knowledge proofs, a type of encryption that reduces transaction costs and boosts throughput, are used to accomplish this.
According to a message from the Polygon Twitter account, the number of decentralized applications hosted by Polygon presently stands at over 37,000, including some from businesses like Meta and Stripe. This represents a 400% growth since the start of the year. In addition, Polygon completely endorses the tether stablecoin, which can help the network expand in the future. Its investment in carbon neutrality is another benefit, and on occasion this has led to price increases.
Risks of Investing In Polygon
According to CoinDesk, Polygon stated in late 2021 that it has corrected a flaw that placed the security of around $20 million worth of its currencies at jeopardy. The exploit was found by a hacker, who alerted Polygon, who installed a remedy two days later. But, over 800,000 tokens had already been taken by black-hat hackers, leaving Polygon liable for nearly $1.4 million.
The world of cryptocurrencies is constantly evolving and changing, and predicting which ones will perform the best in 2023 can be challenging. However, after analyzing the market trends and considering various factors such as technological advancements, community support, and adoption rates, it appears that Bitcoin, Ethereum, Binance Coin, and Cardano are among the top cryptocurrencies to invest in for 2023.
It’s important to keep in mind that investing in cryptocurrencies can be risky and volatile, and investors should always conduct their due diligence before making any investment decisions. Additionally, it’s crucial to have a long-term perspective and not be swayed by short-term market fluctuations.
Cryptocurrencies have the potential to revolutionize the financial world, and investing in them can offer significant rewards. However, it’s crucial to have a well-informed and cautious approach to investing in this field. By staying up-to-date with the latest developments and keeping a keen eye on market trends, investors can make informed decisions and potentially reap the benefits of the burgeoning cryptocurrency market in 2023 and beyond.