2021 will go down in investing history as a good year for stocks. But it will be remembered as a fantastic year for cryptocurrencies. Even with a pullback at the end of the year, many cryptocurrencies soared over the last 12 months.
With the new year under way, though, investors are now focused squarely on the future. There are no guarantees about how any assets will perform going forward, of course. However, here are three explosive cryptocurrencies that could skyrocket in 2022.
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1. Kadena
Kadena (KDA 1.28%) belonged to an exclusive group of cryptocurrencies that gained more than 5,000% in 2021. The digital coin ended the year up well over 8,000%.
Like the granddaddy of crypto, Bitcoin (BTC +3.36%), Kadena's blockchain uses a proof-of-work (PoW) protocol. The big downside for most PoW blockchains is that they aren't scalable. That's not a problem for Kadena. It uses a braided multi-chain architecture with tremendous scalability.
Kadena can currently process 480,000 transactions per second. To put that into context, Bitcoin can only process around seven transactions per second. And there's no limit on Kadena's throughput as more chains are added to the network.
Developers are also attracted to Kadena's super-low costs. Businesses can completely eliminate transaction fees for customers by using Kadena's crypto gas station. Meanwhile, consumers pay minimal transaction fees.
Even after its impressive performance in 2021, Kadena still only ranks No. 63 on CoinMarketCap's list of the top cryptocurrencies by market cap. I wouldn't go as far as to predict that it could crack the top 10 in 2022. However, I think that Kadena definitely has the potential to move significantly higher in the ranking.
2. Avalanche
Avalanche (AVAX +3.30%) enjoyed a breakout year in 2021. Its native token vaulted more than 3,000% higher. Avalanche currently sits at No. 11 on CoinMarketCap's ranking of the top cryptocurrencies by market cap.
The Avalanche blockchain is blazingly fast with the capability to process more than 4,500 transactions per second. And based on time to finality (the amount of time to irreversibly add a transaction to the blockchain), Avalanche is the fastest platform that supports smart contracts.
Nearly 160 projects are already in the Avalanche ecosystem. Avalanche generates more revenue from decentralized apps (dApps) than Solana does. I suspect that the blockchain could see accelerated adoption in 2022.
One huge milestone for Avalanche is that Deloitte is building a cloud-based disaster recovery platform on its blockchain. The large accounting and consulting firm's endorsement is an important milestone that is a critical tipping point for Avalanche, in my view.
3. Ethereum
Ethereum (ETH +2.21%) jumped more than 400% in 2021. That might seem puny compared to the jaw-dropping gains for Kadena and Avalanche. However, don't underestimate the explosive growth potential for the cryptocurrency.
It's important to keep in mind that Ethereum delivered a return of more than 5X last year while facing some significant challenges. Its network is sluggish, with the capability to process only around 14 transactions per second. Ethereum's high transaction fees have also resulted in some developers switching to other blockchains.
But change is on the way. The Ethereum 2.0 upgrade should enable the blockchain to handle 100,000 transactions per second. Transaction fees will also be drastically reduced. These improvements should attract more developers to Ethereum's already widely used blockchain.
Ethereum's market cap of close to $445 billion is currently second only to Bitcoin's. Could it capture the top spot in 2022? I think it's possible. Even if not, the cryptocurrency could still skyrocket in the new year.
