Which Cryptocurrencies are Best to Buy in 2022?

Crypto remains very volatile and its governance is still evolving. In this clip from "The 5" on Motley Fool Live, recorded on Jan. 18, Motley Fool contributors Trevor Jennewine, Jamie Louko, and Taylor Carmichael explore the different cryptocurrencies and share which ones they'd direct their investment dollars into within a diversified portfolio.

Trevor Jennewine: Do either of you guys think cryptocurrency is a worthwhile investment? If so, which crypto asset would you buy right now if you were to choose one and why? Jamie, let's start with you again.

Jamie Louko: Very fitting for me to start because I'm the crypto newbie. I'm going to keep it quick and let you two, who actually know a decent amount about crypto, speak more on this. Crypto for me, if it's the next big thing, a little is all I need. But if it turns out to be nothing, a little is all I want. It's that kind of investment for me. It's very risky, but it does have a high-risk, high-reward type of thing. I do own a little bit of Ethereum (ETH -3.88%). It takes up like maybe 1% of my portfolio. It's a very small portion of my portfolio. I own it solely because I see it being used across Web3 NFTs, that kind of space as a use case, where I'm just not seeing that with other cryptocurrencies. Based on that, along with projects in crypto, projects and other things being built on top of Ethereum, I would say Ethereum, but that's just because I am not an expert in the crypto space. So take it away, Taylor and Trevor. Be smart about crypto.

Taylor Carmichael: It's interesting. I did not own any crypto for years. I just didn't pay any attention to it, just left it alone. I got interested in the space. I bought shares of Silvergate Capital (SI), which is a crypto-related bank a year ago and our cost basis was like 15 or something and now it's over 100, although it got blown apart today. It was ugly. But that gave me a lot of encouragement. I've been playing this crypto game on the internet, which is on the blockchain called Splinterlands (SPS). I would highly advise anybody who is interested in crypto to start playing this free game because they award you free crypto. You win non-fungible tokens. You actually have to invest $10 in order to start owning assets in the game. Based on that $10 investment, I now have like $12,000 worth of assets in this game. That's my Number 1 crypto suggestion. Play that game. Splinterlands. It's a lot of fun. If you don't like games, get your kids playing it because it's a lot of fun and they can actually own the assets. I see that as the change in gaming. We've gone from paying to play games to free games, to now free games that make you money and that's what the blockchain is bringing to that. Historically, the only two crypto to own really were Bitcoin (BTC -3.29%) and Ethereum. What we're seeing in the last year is transition. There are a lot of people who think Ethereum is not going to scale, that it's too slow. We've seen some amazing returns. The cryptos I've started buying are Solana (SOL -5.73%) and Fantom (FTM 0.35%). I don't know if you call them tickers, but Solana is SOL, and Fantom is FTM. These are super-fast blockchains. I think Solana is 50,000 transactions a second. Ethereum is like 14. The finality, which is how long it takes a particular transaction to close is one second on the Fantom blockchain, which is about the fastest. Avalanche (AVAX -6.64%) is similar. I think one second. Bitcoin takes an hour for a transaction to finalize. It's never going to be that standard for a Visa (V 0.79%) transaction or anything like that. Bitcoin has its own investment case for the idea of being a virtual gold currency. You're not going to really build things on the Bitcoin blockchain in my opinion. It is interesting and there's a fight really between Ethereum and Solana. Ethereum is coming out with their second version of Ethereum and they are trying to make it faster because a lot of the early cryptocurrency is built on Ethereum, so it's really the most important crypto for a long time. Now you have faster networks out there. It's this really interesting fight about who's going to be the most important blockchain that other companies build off of. I think it's a fantastic space. I think I'll really suggest that Fools, that we have a lot of great free articles on the blockchain at The Motley Fool, just check it out and read up on it. It's going to take some time, but it's worth making tiny investments now for sure, I think.

Jennewine: I think that was a greater review, Taylor. Taylor, the game you mentioned, did I mishear you? Is it Splinterlands or is it sliver lands?.

Carmichael: Splinterlands and sometimes I misremember. It's Splinterlands. I'm sure I've called it sliver lands before, but it is Splinterlands.

Jennewine: I like Solana and Fantom. I think those are interesting picks. I think if you're new to this space, I think it's worth doing a little bit of research. As some of our viewers have pointed out, the governance in this space is still evolving. Incredibly volatile. In 2021, the crypto market fell 50%, I want to say, between May and August and then it went onto hit a new high of almost $3 trillion and then it's lost a third of that since hitting a high in, I want to say, November or maybe October. Lots of ups and downs in this space. I like Jamie's approach where you make it a very small position of your portfolio. I think it's OK to invest in cryptocurrency as long as it's part of a bigger, diversified portfolio. Personally, I'd probably feel comfortable holding up to maybe 5% of my portfolio in cryptocurrency. I would start with some of the better known crypto assets like Ethereum and Bitcoin but I do think there's a lot of interesting blockchain projects out there, especially in the decentralized finance space. Blockchains like Solana, Fantom, Avalanche. I don't think we've mentioned that one yet. Avalanche is another very fast blockchain. It aims to resolve some of the scalability issues that you have with Ethereum. Transactions on the platform reach finality in 1-2 seconds. The blockchain has been clocked at around 4,500 transactions per second. The developer team thinks that they could scale it up to 20,000 eventually. To put all of those numbers into perspective, companies like Mastercard (MA 0.33%) and Visa regularly handle over 2,000 transactions per second. Once you're in that range, Visa can theoretically scale up to 24,000 transactions per second. But once you're in that range, I think you have achieved sufficient scalability to make mainstream adoption a possibility. Then with decentralized finance, because those products are built on blockchain, you're eliminating, you're cutting out some of the middlemen, some of the financial institutions. That tends to make, at least it could make those financial services more efficient. That's the goal with some of those DeFi products and the platforms that can support that mainstream adoption. I think that's where I would be directing my investment dollars. There's a lot of interesting projects out there, so I do think it's a space worth investigating if you are a particularly risk-tolerant investor.