Heading into 2024, the crypto market is arguably one of the hottest areas of the investment world. Many top cryptos are up triple digits for the year, and analysts continue to pump out higher and higher price estimates for just how high these cryptos might go.
I've picked out four cryptos that I think should be on investors' year-end holiday shopping list: Bitcoin (BTC -2.28%), Solana (SOL -5.59%), XRP (XRP -1.93%), and Cardano (ADA -2.76%). All rank among the top 10 cryptos in terms of market capitalization, all provide real utility and functionality (no meme coins!), and all have strong long-term growth prospects.
Bitcoin
If there's a single crypto to add to your portfolio, it's Bitcoin. I can't think of any crypto that has a better balance of risk and reward. Right now, Bitcoin accounts for a whopping 54% of the value of the entire crypto market, and it's a favorite of both retail and institutional investors.
Even better, Bitcoin has two key catalysts lined up in 2024 that should combine to make it an even better investment than it already is. One is the expected arrival of the first-ever spot Bitcoin ETF for the U.S. market. Official approval from the Securities and Exchange Commission (SEC) is supposed to come in the first quarter of the year, and when it does, an absolute tsunami of new institutional money could flow into Bitcoin.
Image source: Getty Images.
The second catalyst is the upcoming Bitcoin "halving," now scheduled for April 2024. The halving -- which cuts the reward for mining Bitcoins in half -- is an event that takes place only once every four years, so it is highly anticipated by crypto market participants. In three previous halving cycles, Bitcoin has rallied significantly, so the expectation is that Bitcoin will rally this time around, too. That may be the case, or not. Remember: Past performance is no guarantee of future returns.
Solana
In terms of recent performance, Solana could be the single hottest cryptocurrency in the world right now. For the year, Solana is up 540%, and its upward price trajectory keeps getting steeper. While I would normally advise against hot momentum plays in the crypto market, I think there are several reasons to consider Solana as a long-term, buy-and-hold investment.
For one, Solana has become the favorite option for institutional investors looking to diversify beyond Bitcoin. At one time, this distinction belonged to Ethereum. However, if you look at institutional money flows into and out of crypto in recent months, it becomes clear that large institutional investors are moving out of Ethereum and into Solana.
Granted, these investors might just be chasing recent performance, but I think Solana holds up well as a long-term play on the future of blockchain technology. As Cathie Wood of Ark Invest recently said on CNBC, Solana is a faster, more cost-effective version of Ethereum. So, over time, one would expect the market valuations of Solana and Ethereum to converge. Right now, Ethereum has a market cap of $270 billion while Solana has a market cap of $27 billion, so Solana might have 10x upside potential.
Cardano
My favorite undervalued and ignored crypto these days is Cardano. For whatever reason, Cardano just isn't sexy. Maybe it's the rigorous, research-driven, and very academic approach to blockchain innovation at Cardano. Maybe it's the fact that the price of Cardano has never gone stratospheric. The all-time high for Cardano is a rather pedestrian $3.10.
But there's a lot of innovation going on behind the scenes that investors may be overlooking. For one, Cardano has made tremendous progress with decentralized finance (DeFi) this year. The most important metric for measuring overall DeFi strength, known as total value locked (TVL), continues to surge to new highs for Cardano. Historically, low TVL was a major knock on Cardano. But now Cardano ranks No. 12 among all blockchains, and should continue to surge up the TVL charts.
XRP
Finally, there's XRP, which trades for the apparently bargain-basement price of just $0.62. Yes, for the cost of a cup of coffee back in 1975, you can pick up some XRP for your portfolio.
For most of the year, I've been bearish on XRP's prospects, but I'm starting to change my mind for one important reason: This is the closest XRP has ever come to resolving its ongoing three-year court case with the SEC, which is determined to classify XRP as a security. In July, XRP won a major court victory, and the price of XRP doubled nearly overnight. XRP threw a "proper party" at the beginning of the fall to celebrate this win, and final victory now seems to be within XRP's grasp.
My only caveat here is that investing in XRP still seems like market timing to me. Nobody ever talks about the long-term growth prospects of XRP. Instead, all investors ever talk about is the anticipated date of victory over the SEC. But, hey, if you have a few quarters jangling around in your pockets, this might be the ultimate low-cost, high-reward investment. It sure beats buying one of those holiday scratch-offs.
Portfolio allocation
With the goal of portfolio diversification, I wouldn't suggest buying equal amounts of each of these cryptos. It makes sense to have Bitcoin represent at least half (and even more, if you're risk-averse) of any allocation to crypto, especially as Bitcoin accounts for slightly more than one-half of the value of the entire crypto market. And I'd reserve no more than 10% of the allocation to XRP, given that it is the most speculative of these four crypto tokens.
This holiday season is shaping up to be a memorable one for crypto investors. If you're willing to experience the volatility of crypto, then it could be time to snag one or more of these cryptos for your portfolio.
