In its typical cyclical fashion, the crypto market is gearing up for another bull market run. While household names like Bitcoin and Ethereum remain safe bets to ride the waves of a bull market, when it comes to crypto, it's usually the ones that fly under the radar that make the most significant gains.
Here are three cryptocurrencies that should be on every investor's list if we're at the start of a new bull market.
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1. Stacks
It's no secret that Bitcoin can really only be used for storing value or as a means of payment. But there's one blockchain looking to change that -- Stacks (STX -3.71%).
With its smart contracts and symbiotic relationship with Bitcoin's blockchain, Stacks enables users to participate in the decentralized finance (DeFi) economy but in a Bitcoin-centric fashion. Stacks is a Layer-2 blockchain, and all transactions on Stacks are finalized on Bitcoin, meaning it shares Bitcoin's unparalleled levels of security and decentralization.
Most importantly, though, Stacks is sitting on a multibillion-dollar opportunity. Take Ethereum, for example. Similar to Stacks' relationship with Bitcoin, there are several Layer-2 solutions built on top of Ethereum. As Ethereum's popularity in DeFi has grown, so have its Layer-2 partners. Today, the collective value of all Ethereum Layer-2 blockchains is worth more than $20 billion.
Here lies the opportunity for Stacks. Bitcoin is 3 times as valuable as Ethereum, and Stacks holds the keys to unlocking this dormant capital. Today, Stacks' market cap sits at just around $3 billion. If Bitcoin becomes the foundation of a digital economy like Ethereum, then Stacks could see its value soar.
2. Kaspa
No blockchain is perfect. In some way or another, every blockchain makes trade-offs between high speeds/low fees (scalability), security, or decentralization. But there's one new project with some serious potential to check all three boxes.
Created in 2021, Kaspa (KAS -5.34%) utilizes an innovative blockchain design to provide users and developers with the best possible experience. While traditional cryptocurrencies like Bitcoin and Ethereum use linear blockchains where block after block is added sequentially, Kaspa's blockchain isn't even really a chain. A better representation would be to describe Kaspa as a "blockweb."
Kaspa's innovative approach to the blockchain means it can process transactions exponentially faster than traditional blockchains. But most importantly, it doesn't make sacrifices in decentralization and security to accomplish this.
While plenty of blockchains out there today boast impressive scalability, none are able to preserve high levels of decentralization and security. But Kaspa comes awfully close.
The technicalities can be overwhelming, but suffice it to say Kaspa's innovative network allows it to preserve high levels of decentralization and security. In fact, Kaspa was designed with many of the same principles that have made Bitcoin the most secure and decentralized cryptocurrency in the world. Not to mention, it also has a finite supply of coins that will enter the market at a diminishing rate, just like Bitcoin.
Kaspa is still in its early days, making this option extremely speculative, but the project looks promising. Soon, developers will unveil smart contracts, allowing for the construction of innovative decentralized applications commonly found on other blockchains today. If all goes to plan, Kaspa could become the most secure, decentralized, and scalable blockchain all in one.
3. Polygon
Probably the most well-known of the three cryptocurrencies to make this list is Polygon (MATIC -0.66%), an Ethereum-compatible Layer-2 blockchain. Launched back in 2017, Polygon has been around for a while, but is likely far from reaching its full potential.
As one of the most popular blockchains in the world, Ethereum is prone to slow speeds and high fees when the network becomes bogged down with traffic. Rather than overhauling Ethereum's blockchain (which would be a significant challenge), Ethereum developers plan on optimizing the network to increase scalability through Layer-2 blockchains like Polygon.
With a clear role in Ethereum's future viability, Layer 2s are a lucrative opportunity for investment. Yet, while several Ethereum-compatible Layer 2s exist today, Polygon stands out for various reasons.
Notably, it has been around the longest and boasts a proven track record of functionality. In addition, it is home to more active users and processes more transactions daily than any other Layer 2. But most importantly, Polygon is building for the future.
If all goes to plan, Polygon could become the premier Ethereum scaling solution. Like many aspects of blockchains, the details can be a little complicated, but over the coming year, Polygon will implement an upgrade that will allow developers to build entire new blockchains to suit specific needs. You could almost think of these new blockchains as Layer 3s built on top of Polygon.
But since the common thread among these new chains will be Polygon, they will all be interoperable with each other. This flexibility and customization, combined with its Ethereum compatibility, could make Polygon one of the most functional and sought-after blockchains to build on in the digital economy.
Closing thoughts
It can't be emphasized enough that these assets are extremely speculative compared to more proven assets like Bitcoin or Ethereum. Although optimistic outlooks assume that all will go to plan and these cryptocurrencies will reach their full potential, many things must go right for this to happen.
However, if targets are reached and goals are achieved, then these cryptocurrencies have the potential to transform portfolios in ways that only cryptocurrencies can. Don't be surprised if Stacks, Kaspa, and Polygon become this bull market's group of hidden gems.
