The total value of all cryptocurrencies has risen from $14 billion to over $2 trillion over the last five years. The potential for more returns could make it a gift that keeps on giving.
However, crypto prices can be quite volatile, so gifting some cryptocurrency is a great way for someone to learn the ins and outs before they commit hard-earned money to this risky market.
That said, here's why Bitcoin (BTC 0.59%), Ethereum (ETH 0.60%), and Solana (SOL 1.45%) would make great gifts.
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Bitcoin
Bitcoin is the most widely held cryptocurrency, with a market value of $967 billion at the time of writing, representing 40% of the crypto market. Its size and value makes it one of the best coins to hold.
It's about the network effect. Bitcoin has been around longer than all the other coins, which has led to more people transacting with it. Bitcoin's popularity is why it's the most widely accepted cryptocurrency for payment at merchants and online stores, which makes it more valuable for people to hold in their digital wallets. A total of 2,979 stores and markets accept Bitcoin and altcoins for payment, according to data from Cryptwerk. Out of that number, Bitcoin is accepted at 2,757 stores.
Bitcoin's growing acceptance as a form of payment could lead to growing demand and push the value up further over time. The number of digital wallet addresses with a non-zero balance that hold Bitcoin increased from 28.1 million to 32.7 million between the end of 2019 through 2020, according to data from Glassnode. That still leaves hundreds of millions of people that could one day enter the market and create new demand for the most popular coin and drive its value up even higher.
Ethereum
Ether (ETH) is the cryptocurrency behind Ethereum. It is the second most valuable cryptocurrency, making up about 22% of the total market.
Many investors are buying Ethereum, which has soared nearly 800% in value over the last year, because the technology behind ETH enables more use cases than Bitcoin, including applications in gaming, finance, private transactions, and non-fungible assets.
There is also a pending upgrade to the Ethereum protocol. Ethereum 2.0 should make it faster at processing transactions. It's currently capable of processing between 15 to 45 transactions per second -- much faster than Bitcoin's processing time of about three transactions per second. It also promises to make Ethereum more secure against attacks and more energy efficient.
It's for these reasons that ETH has outperformed Bitcoin over the last year and why some believe ETH may one day surpass Bitcoin in market value.
Solana
If investors are interested in ETH for its greater utility value over Bitcoin, then investors should love Solana even more than ETH. It enables a large ecosystem of over 400 applications, including decentralized finance, the largest marketplace for non-fungible tokens (OpenSea), and various apps and games.
Solana is also valued for its speed. It is faster than Bitcoin and Ethereum, currently processing up to 2,500 transactions per second, and Solana does this at a relatively low cost.
The knock against cryptocurrencies is slow transaction speeds. Major credit cards can handle thousands of transactions per second. This is a major hurdle digital currencies must overcome to become a mainstream payment method, but it's Solana's edge in speed that has many crypto fans excited about its prospects.
Solana has soared in value since the beginning of 2020, with its market cap increasing from $1 billion to $59 billion. It's currently the fifth-largest cryptocurrency by market value, so it's large enough to start gaining widespread adoption as a form of payment but still small enough to offer potentially better returns than Bitcoin or Ethereum.
