The Trump administration is pushing to make the U.S. the crypto capital of the world. As a result, more investors are taking a hard look at the crypto sector and considering which cryptocurrencies could benefit the most over the next few years and beyond.
It's always difficult to know which cryptocurrencies to buy because they operate differently from publicly traded stocks. Plus, with random tokens regularly doubling or even tripling in a single day or week, it can be difficult for investors to remain disciplined. Here's the best cryptocurrency to buy with $1,000 right now.
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Think technical
As many investors understand, cryptocurrencies are quite different from stocks. The sector initially launched as an alternative to mainstream finance in the wake of the Great Recession, which turned many people away from the traditional world of money and finance because it destroyed so much capital when markets crashed. While crypto can be used as a currency and may grow in popularity, most people now view the major cryptocurrencies as investment vehicles.
The difficult thing about crypto, however, is that these digital assets don't generate free cash flow and earnings like traditional stocks, and investors tend to value stocks by assigning multiples based on these metrics. A common investment strategy has been to look for cryptocurrencies that run on blockchain networks with strong real-world utility.
Few, if any, cryptocurrencies can boast a stronger technical network than Solana (SOL -1.38%), which is now the sixth-largest cryptocurrency in the world, with a market cap of almost $130 billion. Similar to Ethereum, Solana's network is governed by a proof-of-stake consensus mechanism in which Solana investors are able to stake tokens, locking them up for the opportunity to validate transactions and create new blocks in return for interest-like rewards. The more tokens one stakes, the higher likelihood that the holder has to be chosen in this process.
Solana's network takes it a step further with a proof-of-history mechanism, which essentially assigns time stamps to each transaction. This removes a time-consuming aspect of processing transactions on other decentralized networks.
Due to this technological strength, Solana's network has strong throughput and can process thousands of transactions per second (TPS). According to CoinMarketCap, Solana is currently processing about 2,000 to 3,000 TPS, although other reports have put Solana's current TPS higher at 3,700.
Regardless, the network is capable of doing so much more. During a stress test, when developers see how much TPS a network is capable of handling, the network reached 100,000 TPS.
Other tailwinds for Solana is the expected approval of a spot-Solana exchange-traded fund (ETF), which may be coming any day now, although it's unclear how a government shutdown could change the timeline. Furthermore, more publicly traded companies are starting to think about buying Solana as a treasury asset, raising capital to purchase it. Several companies are already doing this with Bitcoin and Ethereum, boosting prices of both.
A strong fundamental business model often wins the day
Investing in cryptocurrencies is undoubtedly difficult. Aside from the challenges I mentioned above, crypto is a relatively new asset class, so there's still a lot that investors need to learn about the sector. Crypto is also volatile.
However, if you think about traditional investing, a company with a strong business model will often thrive eventually as long as it keeps executing. That's how I view Solana. It has a very strong technical network that will have significant real-world utility. That's why I think it's the best cryptocurrency to buy right now.
