While cryptocurrency is an exciting emerging asset class, not every cryptocurrency is a buy. Crypto investors are constantly bombarded with information on what cryptocurrency to buy next before it "goes to the moon."

Let's take a look at some cryptocurrencies that readers would be better off avoiding. It may be because of a lack of utility, questionable value, or the fact that it's being made obsolete by developments elsewhere in the crypto space. Three cryptos to avoid are Bitcoin Cash (BCH 2.06%), Dogecoin (DOGE 4.52%), and Hex (HEX).   

Crypto investor monitors investments on multiple monitors.

Image source: Getty Images.

1. Bitcoin Cash

RJ Fulton (Bitcoin Cash): Bitcoin Cash was created as the result of a hard fork from Bitcoin in 2017. Its original purpose was to solve some of Bitcoin's shortcomings, like high fees and slow speeds. However, new innovations in blockchain technology have caused Bitcoin Cash to potentially become obsolete. 

One of the primary differences between Bitcoin Cash and Bitcoin comes down to the block size. Bitcoin Cash's block sizes are 32 times larger than Bitcoin's. The thinking goes that larger blocks are capable of holding more data. Subsequently, transaction speeds are faster and fees are lower since block sizes are more efficient.

At first glance, it would seem that Bitcoin Cash has an advantage. Yet in recent years, new technology now allows Bitcoin to become just as efficient as Bitcoin Cash without sacrificing any of the security or decentralization that makes Bitcoin unique. 

Known as the Lightning Network, this solution helps Bitcoin transactions to be fulfilled faster and more cheaply. The Lightning Network processes transactions in batches separately from the main Bitcoin blockchain.

Without getting too much in-depth, the Lightning Network creates channels between users to send transactions. These channels keep a running tab of balances. Once a user cashes out, the channels are closed. Then transactions are bundled up and added to the main Bitcoin blockchain.

Over the course of last year, the Lightning Network grew by more than 300%. Thanks to integrations with mobile apps like CashApp, Strike, and even Twitter, the Lightning Network can now reach hundreds of millions of users. 

Think of the Lightning Network as turning Bitcoin from a two-lane county road into a six-lane highway. Before the Lightning Network, it wasn't unheard of for a Bitcoin transaction fee to cost more than the transaction itself. Now, with the Lightning Network, you can avoid those high fees and slow speeds to use Bitcoin for everyday purchases like your cup of coffee.

Consequently, this new solution may have ended the one use case that Bitcoin Cash had over its original predecessor. Rather than hoping that Bitcoin Cash can catch up to Bitcoin in popularity and value, investors should steer clear of this cryptocurrency that might be on its last leg. 

2. Dogecoin 

Neil Patel (Dogecoin): Despite rising more than 10% over the past week, Dogecoin is still down 91% (as of July 19) from its peak price of $0.74 set in May 2021. That's an eye-popping drawdown in such a short time frame, but it underscores the fact that investors should stay far away from this dog-inspired meme token. As of this writing, Dogecoin had a market cap of $9.2 billion, making it the 10th most-valuable cryptocurrency network in the world. 

Founded in 2013 by Billy Markus and Jackson Palmer, Dogecoin was created as a casual and fun competitor to the largest cryptocurrency, Bitcoin (CRYPTO: BTC). But while Bitcoin, which is slowly becoming accepted as a legitimate store of value, has the longest operating history in the space with a deep developer network and a growing list of financial infrastructure supporting it, Dogecoin's primary use thus far has been as a tipping mechanism on sites like Reddit and Twitter. 

There's no real competitive edge that Dogecoin possesses among the more than 20,000 cryptocurrencies out there. To make matters worse, DOGE is meant to be an inflating digital asset, meaning there's no cap on the supply of tokens. In fact, 10,000 new DOGE are mined every single minute, making price appreciation even more difficult to achieve.  

Dogecoin's price did skyrocket in the spring of 2021 for no real reason other than the hype it received on social media. As part of the meme-stock craze that propelled otherwise struggling companies like AMC Entertainment and GameStop to new heights, Dogecoin benefited from renewed interest among younger speculators. Believing in the community might be the only bull argument for Dogecoin, but even this factor may have already peaked. 

The token's most prominent supporter, Tesla CEO Elon Musk, has been known to occasionally tweet about DOGE, which unsurprisingly causes the crypto's price to pop, albeit for a short time. Mark Cuban, the billionaire owner of the National Basketball Association's Dallas Mavericks, is also a well-known supporter of Dogecoin. Both of these businessmen have even gone so far as to allow their respective organizations to accept payment in Dogecoin for certain items. I see no objective for this other than to use the token's popularity to drive interest as a publicity stunt. 

Hoping for renewed interest from the crypto community to push DOGE's price higher in the hopes of making a quick profit is not a worthwhile investment strategy. For this reason, it's best to avoid Dogecoin altogether. 

3. Hex 

Michael Byrne (Hex): For a coin just outside of the top 200 tokens in market cap, Hex (HEX) is garnering a lot of attention on social media and beyond. This is largely thanks to its charismatic founder and extensive advertising lauding the returns investors can make and the high yields they can earn by holding Hex. The advertising makes bold claims such as, "Hex is designed to go up 10,000x in only the first 2.5 years" and compares it to investing in Bitcoin at $1.

I'm wary of the fact that the Hex website states that it's "like Bitcoin, but better." The section that asks, "Is Hex a Ponzi, pyramid scheme, MLM, scam, or security?" with the simple answer "No," also raises eyebrows.

Hex users essentially send Ethereum to a wallet address and receive Hex tokens in return. (While it can now also be traded on Uniswap, it is notably missing from major exchanges like Coinbase, Gemini, and even Binance.) Users can then leave these tokens in the Hex protocol, where Hex advertises that staking them leads to average returns of 38% a year.

This is purportedly akin to a blockchain version of a certificate of deposit where holders are paid for locking their money in for a period of time. However, the Hex tokens they earn can just be created by Hex whenever they want and are inflationary in nature, offering little in the way of utility or revenue generation.

I also don't like the idea of investors sending their hard-earned Ethereum to an unknown wallet. The better strategy would be to simply hold on to Ethereum as the Ethereum network readies itself for exciting developments like The Merge.

As we have seen with countless projects offering high yields that have imploded over the past few months, the high yields are not usually sustainable and are best treated with caution. Hex is down from a high of just under $0.50 that it hit in September 2021, and today it trades at just $0.05. Like many smaller cryptos, Hex may find it difficult to return to previous highs during the crypto winter.

In addition to the concerns above, there's also the simple question of opportunity cost. In the current market environment, investors can accumulate positions in blue chip cryptos like Bitcoin or Ethereum at a steep discount to where they were just a few months ago.

The crypto market is speculative and volatile. It's probably wiser to add to positions in the top assets at these levels, rather than speculate on tokens with a more questionable future or use case like Hex and Dogecoin, or ones that are becoming obsolete, like Bitcoin Cash.