Although 2021 may have been the year that cryptocurrency went mainstream, 2022 looks even more promising for some of the biggest names in crypto.
Crypto can be an intimidating investment, as some cryptocurrencies see explosive growth only to plummet essentially overnight. Investing isn't a get-rich-quick tactic, however. If you want to maximize your earnings, it's best to buy solid cryptocurrencies and hold them for as long as possible.
Not all cryptocurrencies are created equal, so it's crucial to make sure you're investing in the right places. These three cryptos have real-world utility and the potential for long-term growth, making them smart buy-and-hold investments.
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1. Ethereum
Ethereum (ETH 0.71%) is one of the strongest players in the crypto market right now. Not only can its native token, Ether, be used as a form of payment, but the Ethereum blockchain itself is home to a wide variety of decentralized applications (dApps).
These dApps include projects such as decentralized finance (DeFi) and non-fungible token (NFT) marketplaces, and they could potentially revolutionize a variety of industries. Also, because the network is open-source, developers around the world can create new projects on Ethereum. This creates nearly unlimited potential for growth.
The biggest hurdle Ethereum is facing right now is its speed (or lack thereof). It's currently one of the slowest cryptocurrencies out there, with a transaction speed of around 15 transactions per second. (For reference, Visa can reportedly process up to 24,000 transactions per second.)
However, Ethereum is currently in the process of updating its network. According to Ethereum co-founder Vitalik Buterin, once Ethereum 2.0 rolls out sometime this year, it could potentially handle up to 100,000 transactions per second. With that kind of speed in addition to its powerful blockchain, Ethereum could be a force to be reckoned with in the coming years.
2. Bitcoin
The grandfather of all cryptocurrencies, Bitcoin (BTC 0.44%) is the most widely accepted form of crypto. It's also the most expensive, reaching an all-time high of nearly $70,000 per token earlier this year.
While some of the hype around Bitcoin has died down as more investors focus on newer competitors in the crypto space, the original cryptocurrency remains a strong investment. Bitcoin is still the most popular cryptocurrency, with a market cap of close to $900 billion -- nearly half of the entire crypto market.
One of Bitcoin's strongest advantages is its ability to hedge against inflation. Unlike fiat currencies such as the U.S. dollar, there is a finite supply of Bitcoin tokens that can be created. This scarcity has led some investors to consider Bitcoin "digital gold," and, similar to gold, its value should increase over time.
Whether Bitcoin can actually hedge against inflation is still up for debate, however. Because it's so new (especially compared to gold, which has been valuable for centuries), nobody knows for certain how well Bitcoin will perform over time. If it never becomes widely accepted by the public, it likely won't succeed as an inflation hedge.
That said, Bitcoin is the most popular cryptocurrency for a reason. It's currently the most widely adopted by merchants, and if there's any crypto that could potentially become a mainstream form of payment, it's likely to be Bitcoin.
3. Cardano
Cardano (ADA 0.61%) is a newer cryptocurrency, but it's already a powerhouse. Created by one of the co-founders of Ethereum, Cardano aims to solve the most prevalent problems plaguing the crypto industry.
For instance, it uses a proof of stake (PoS) mining protocol, which is much faster and more environmentally friendly than the proof of work (PoW) protocol used by Bitcoin and Ethereum. While Ethereum is transitioning to a PoS system with its update, Cardano already uses PoS and is therefore a step ahead of Ethereum in that regard.
In addition, unlike other cryptocurrencies, Cardano uses a peer review system when implementing changes. In theory, this should result in fewer bugs, because all updates have to be approved by a group of peers before they can roll out. The downside, however, is that things move at a break-neck pace in the crypto world, and this review system makes it more difficult for Cardano to keep up with its competitors.
For this reason, Cardano is a long-term investment. Cryptocurrency isn't necessarily a zero-sum game, and it's possible for Bitcoin, Ethereum, and Cardano to co-exist and fill separate niches. However, it could take longer for Cardano to reach its full potential.
All cryptocurrencies are still highly speculative, so nobody knows for certain whether they will succeed over the long run -- and even the best ones will still experience short-term volatility. But by investing in the strongest cryptocurrencies and holding them for as long as possible, you're more likely to make money over time.
