The crypto market has slowed down some to cap off a big year in 2021, but it's still heading into 2022 with a great deal of excitement and momentum behind it. The big dogs like Bitcoin hit new highs in 2021, lots of other cryptocurrencies emerged with strong potential, and cryptocurrencies got more ingrained into the traditional financial system. Two Motley Fool contributors believe Solana (SOL -5.76%) and Ethereum (ETH -4.01%) are some of the best cryptocurrencies to buy right now. Here's why.
Blood is in the water and Solana is a great white shark
Taylor Carmichael (Solana): While Bitcoin gets all the ink, crypto enthusiasts understand that for many years Ethereum was actually the most powerful blockchain out there from a technological standpoint. Anybody who wanted to build decentralized apps (dApps) built them on the Ethereum network. And it's this network of developers that gives a lot of power (and value) to the Ethereum blockchain. Early adapters building out their own blockchains are loath to switch away from Ethereum because doing so would take a lot of time and money.
On the other hand, if you're a new company building out your software on a blockchain now, there's no way you would choose Ethereum to build on. Its technology is too slow and too expensive.
I believe most developers in the future are going to build out on the Solana blockchain, not Ethereum. The difference in speed and cost makes it a no-brainer. If you were buying a car, would you buy one that goes 65,000 mph or one that tops out at 14 mph? If you were buying gas, would you pay $70 a gallon, or go across the street where gas costs far less than a penny?
Solana's technology is radically faster and cheaper than Ethereum's. And the crypto markets have noticed.
Because of the rise of the Solana blockchain, the crypto universe is in a massive state of flux right now. Many blockchains are trying to fix Ethereum by making it faster and cheaper. (Ethereum is trying to fix Ethereum, too). And Solana has a lot of competitors, like Avalanche and Cardano, which also claim fast speeds and are trying to build out rival networks.
When you have a severe tech disruption like this, it creates a lot of fear, uncertainty, and doubt. And it also creates a lot of opportunities. The important takeaway for investors is this one: the king is in trouble. And it's Solana's massive speed and extreme low cost that's the source of all this disruption.
This doesn't mean that Solana will win. We don't know what the ultimate winner is going to be. That's why a lot of investors opt for a basket approach (I like that approach myself). My big tip is if you're buying crypto, make sure you have Solana in your crypto basket.
Finding stability in what could be a tougher market
Bram Berkowitz (Ethereum): As the second-largest cryptocurrency, Ethereum has now amassed a market cap of roughly $450 billion. This year was also big for the network because it showed how much real-world utility its smart contract capabilities have with things like non-fungible tokens.
While going forward Ethereum may not be able to produce some of the same explosive gains as newer cryptocurrencies with smaller market caps, I think its notoriety and large market cap offer more stability, mainly because it's clearly here to say. It may be susceptible to volatility, but long term I would expect it to be a good buy. This is important because 2022 could be a difficult year for cryptocurrencies. Over the last few months, as the Federal Reserve has indicated that it would speed up the tapering of its bond-buying program and potentially raise interest rates three times in 2022, the crypto market has largely sold off like the tech and growth sectors.
Ethereum may prove a better hedge to inflation because of the Ethereum 2.0 upgrade that is currently in progress. With the completion of the London Hard Fork in August, the network now burns a small portion of Ether tokens on every transaction it makes as part of its new gas fee model. So the supply of Ether is now growing at a smaller rate, and long-term projections show the supply could ultimately shrink 2% annually once the Ethereum 2.0 upgrade is fully in place. This makes the currency naturally more deflationary than it was and in a better position to hedge an inflationary environment.
The significant upgrade to the system will also make the network more energy-efficient and enable it to process more transactions per second. Given its market cap and real-world use, I think Ethereum can offer more stability long term than most other cryptocurrencies. And with a big pullback in the price since November, this could be a good buying opportunity.
Be smart about crypto in 2022
There are tons of great cryptocurrencies to look at heading into 2022. But with tougher market conditions expected and less liquidity as the Fed tapers, we believe you will have to get more selective with your picks. We think Ethereum and Solana are two of the best cryptocurrencies to buy right now.