One thing investors learned in 2021 is that cryptocurrency is far more than a passing fad. The total market cap for all cryptocurrencies more than doubled last year, from under $1 billion to about $2.3 billion by the end of 2021.
But just as investors are catching on, crypto has been dipping, already down to $2.2 billion in total market cap in 2022. Bitcoin, the king of the cryptocurrencies, is down 10% over the past month, and social media crowd-pleaser Shiba Inu, which gained 40,000% in 2021, is down over 10% over the past month.
This could be a worrisome sign. But there are reasons to be confident in cryptocurrency this year -- you just have to pick the right ones. If you're ready to jump in, I recommend choosing crypto coins that are both stable and growing. My top two picks for 2022 are Ethereum (ETH 0.53%) and Solana (SOL 1.19%).
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Leading the crypto revolution
Bitcoin may be king in crypto, but Ethereum is powering the revolution. It provides the infrastructure for many crypto applications. Many other crypto coins, including metaverse tokens and applications, are built on top of the Ethereum platform. That gives it tremendous power in the crypto world.
Ethereum's developers tout its benefits in creating an open and secure environment. It provides access to financial transactions to anyone, without the need to be approved by a bank, as well as privacy, which allows users to make transactions without government regulation.
That's why it's at the forefront of what's called DeFi, or decentralized finance. This has major repercussions for how financial transactions can take place, as more people turn to crypto, and Ethereum, for easy peer-to-peer payments without interference.
As it's grown in popularity and real-world utility, it's become recognized by major financial players. Ethereum's native token, Ether, is one of only four cryptocurrencies you can trade on PayPal Holding's app, and Shopify lets its subscribers accept it (in addition to others) on their websites.
The exciting news about Ethereum in 2022 is that it's upgrading its platform to work faster and support a broader range of applications. Right now, the platform can only handle 15 to 45 transactions per second (TPS), which slows down traffic and causes congestion. Without going into the mechanics of how, which involves splitting off "nodes," or creating new "shards" off of the original blockchain ledger, the new upgrade should be able to handle up to 100,000 TPS, significantly increasing its power. It's also meant to make the platform more secure and sustainable.
Ethereum has 15% of the total crypto market, and with its use and improvements, it should be a standout crypto in 2022.
Doing it better
On the other side of that are newer cryptocurrencies that were built better than some of the original ones and are just getting started. One of them that is making waves is Solana.
Solana supports many crypto projects including DeFi lending protocols and non-fungible token (NFT) marketplaces. It's super-fast, able to handle up to 400,000 TPS, and even up to 710,000 TPS under certain conditions, according to the Solana whitepaper. It claims that it's the fastest crypto platform in the world, and the fastest-growing. The platform uses a proof-of-stake validation system, which means that users use their SOL tokens as collateral to make transactions. This is a much cheaper and more sustainable system than the proof-of-work system in place in Bitcoin's and Ethereum's platforms. (The Eth2 upgrade is meant to change that for Ethereum.)
What's intriguing about Solana is that it was built with a composable network, which means it can "communicate" with other systems, and other systems can also easily be built on top of it. That adds a lot for the future of cryptocurrency, which will grow much faster if the various platforms can work together. Recently, Solana's attracted basketball legend Michael Jordan, who is creating a social media platform for fans on the Solana platform with his son. There are so many uses for the technology that are just being discovered, and Solana is the platform of choice for its speed and scalability.
A final note. Cryptocurrency is unregulated and still relatively new. There's plenty of risk involved, so even though the potential gains are huge, you should only invest money that you're willing to lose.
