The cryptocurrency market is still in its infancy. Even the most mature digital currencies are evolving their code, their long-term goals, and their philosophical approaches rapidly. Regulators around the world are figuring out how to manage crypto trades, ownership, and taxation. Amid the turmoil, crypto prices are as volatile as ever. And we ordinary investors are scratching our heads, trying to make sense of the whole mess. It's not easy to build a successful long-term investment portfolio in this ever-changing market.

However, there is light at the end of the tunnel (and I don't think it's an oncoming train). If you keep a close eye on Bitcoin (BTC -0.07%), Ethereum (ETH -1.37%), and Ripple (XRP 1.95%) in the second half of 2022, I think you'll enter 2023 with a more complete picture of the crypto market's future.

Ethereum after "the merge"

The Ethereum blockchain network is about to undergo a massive upgrade. In an event known as "the merge," the old Proof-of-Work system will be replaced by a leaner Proof-of-Stake system. The upgrade is bringing several fundamental changes to how Ethereum processes transactions and setting the stage for several platform upgrades in 2023 and beyond. Ethereum mining is going away, transactions will get faster and cheaper, and the revamped Ethereum ecosystem should be able to fend off challenges from so-called Ethereum killers.

The merge should take place in September, though an exact date hasn't been nailed down yet. Investors need to keep a close eye on how the game-changing platform upgrade works out. First, of course, the actual change needs to be executed without technical hiccups. Then, we'll see how crypto-based app developers approach the upgraded Ethereum platform, finally, the change is undoubtedly good news for Ethereum in the long run but the immediate market reaction is unpredictable.

Ethereum co-founder Vitalik Buterin estimates that the platform will be 55% complete after the merge, leaving plenty of room for future improvements. Whatever happens in September and beyond should give us clues on where Ethereum is going next -- and how market makers will adapt as the decentralized computing platform grows up.

Is Bitcoin ready to become a digital replacement for gold?

The first cryptocurrency on the market is also the largest name, 13 years later. However, Bitcoin is still finding its place in the global economy.

Bitcoin started 2022 at a price of $46,700 per coin. That lofty price tag fell all the way to $17,700 by mid-May, and the price chart has continued to feel wobbly since then.

This whimsical volatility is not what Bitcoin investors want to see. Bitcoin was always intended as an electronic replacement for cash, offering efficient payment functions and a reliable long-term store of value. The cryptocurrency may be on its way to reaching these goals, but nobody would call it a safe value vault today. Even Bitcoin evangelists such as MicroStrategy (MSTR 6.22%) CEO Michael Saylor agree that the system has not reached its full potential yet, and that long-term stability won't occur until there's a firm regulatory system in place.

So when you watch Bitcoin's price chart in the next few months -- really, over the next couple of years -- you should see it as a barometer of the progress in cryptocurrency regulation efforts. This is a global issue, but the American market should lead the way to a useful rulebook and a sensible taxation strategy. Until the government and its supporting agencies hammer out these details, Bitcoin will remain volatile. And as the regulatory system develops, the devil is in the details. Again, Bitcoin's price moves should serve as an indicator of how these efforts are working out.

Ripple's legal issues can set the tone for the whole market

And of course, we can't forget about the Ripple network and its XRP token. This discussion goes hand in hand with the regulatory reviews mentioned in the Bitcoin section. The Securities and Exchange Commission (SEC) filed a lawsuit against Ripple in December 2020, alleging that some of its executives had been engaging in unregistered offerings of digital securities. Most crypto exchanges were quick to remove their support for XRP trades, and the legal wheels are still turning.

The District Court of Southern New York is scheduled to deliver a summary judgment next week. That decision will not be the end of the proceedings, but it should provide guidance on which way the courts are leaning on several important issues. Is Ripple's XRP an investable security, as the SEC argues, or just a payment system, as Ripple claims? Should all cryptocurrencies be viewed through the same lens, or should the trading and spending rules for some digital coins be fundamentally different from others?

Whatever Judge Analisa Torres says in the upcoming summary judgment, her legal opinion will guide the industrywide discussion on cryptocurrency trading rules. XRP sits at the epicenter of that conversation, hoping to get back in business with full-featured trading on American crypto exchanges. In addition, the judgment may shake the very foundations of the crypto market with knock-on effects for Bitcoin, Ethereum, and others.

The long-term future of cryptocurrency investments is being determined right now. The lessons learned from watching Ripple, Ethereum, and Bitcoin in the second half of 2022 will serve you well in the coming years and decades.