4 Cryptos That Could Grow Faster Than Bitcoin in 2022
Many altcoins outperformed Bitcoin in 2021 and could do so again in 2022.
- Many smaller cryptocurrencies will grow faster than Bitcoin in the year to come, but the crypto king still has a place in every portfolio.
- Ethereum, Polygon, Cosmos, and Audius are interesting coins to watch.
Bitcoin (BTC) is the grandaddy of cryptocurrencies and has produced truly incredible returns of almost 60,000,000% since it launched. However, it is slowing down in its old age and did not perform as well as many other top 300 cryptocurrencies by market cap in 2021.
That's not to say it performed badly. Bitcoin gained around 60% over the year, according to CoinMarketCap data. In spite of its volatility, it is increasingly viewed as a type of digital gold or a store of value. A store of value is something that won't lose its worth over time.
All cryptocurrencies carry risk, but Bitcoin is safer than many smaller coins. It has been around the longest and has made the biggest strides in terms of adoption. However, it isn't going to produce the same percentage gains as smaller coins.
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These four cryptos all have potential to grow faster than Bitcoin in 2022. But don't ignore the crypto giant -- it still has a place in your portfolio.
1. Ethereum (ETH)
Ethereum was the first cryptocurrency to launch smart contract capabilities, which allowed applications to be built on its network. As a result, it is the cornerstone of the booming decentralized finance and non-fungible token (NFT) industry. Unfortunately, it's been the victim of its own success as the system suffers from high gas fees and network congestion.
It is in the process of an upgrade to Eth2, which is due to be finished in 2022. The upgrade is challenging -- it's a bit like trying to repair a car while it is still motoring along the highway. But if -- and it's a big if -- it can complete the upgrade on time and without any technical difficulties, we can expect strong growth from Ethereum in the year to come.
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2. Polygon (MATIC)
Polygon is a layer 2 solutions aggregator for Ethereum. Layer 2 solutions essentially sit on top of the original blockchain and improve performance. In Ethereum's case, this can reduce gas fees and speed up transaction processing. Polygon solves an important problem facing many developers and traders on Ethereum's network.
Even once the Eth2 upgrade is completed, Ethereum's founder Vitalik Buterin says layer 2s will still have a crucial role to play in terms of scalability and interoperability. Plus, several big metaverse tokens -- such as The Sandbox (SAND) and Decentraland (MANA) -- are already partnering with Polygon. This is a good coin to put on your 2022 watchlist.
3. Cosmos (ATOM)
Other cryptos that could grow faster than Bitcoin this year are layer 1 networks. These networks went back to the drawing board and built new smart contract crypto ecosystems that are faster and cheaper by design. They don't need layer 2s to improve their performance.
Solana (SOL) is one that's shot to fame this year with a price increase of over 11,000%. And there are several others, including Cosmos, jostling for position. Cosmos is interesting because it's a programmable blockchain that's also focused on interoperability -- ensuring networks can talk to each other. Interoperability is likely to become more of an issue in 2022, making Cosmos a good altcoin to watch.
4. Audius (AUDIO)
Other cryptocurrency sectors that will likely grow faster than Bitcoin are decentralized networks with real world use cases. Audius is a good example. It's a decentralized music streaming platform that some say could be the next Spotify.
The idea is that musicians can upload their music directly to the platform and receive rewards. They don't need to use record labels or other platforms that take a big chunk of the proceeds. Audius announced a partnership with TikTok in August 2021 and also has some solid crypto backers.
Diversification is key
In truth, if the cryptocurrency industry continues to grow next year, there are many coins that will grow faster than the king of cryptos. Smaller coins simply have more growth potential percentage wise. But you should still own Bitcoin, especially if you're new to crypto investing.
Other cryptocurrencies come and go, but Bitcoin has the longest track record and is the most likely to survive a market crash. Our research showed that 136 cryptocurrencies that ranked in the top 300 at the start of the year have since fallen from grace. That means over 45% couldn't hold their top 300 position for a whole year. In contrast, Bitcoin has been at the top for over a decade.
We don't know what will happen to crypto in 2022. We may see prices drop on the back of heavy regulation. After the highs of 2021, the market could be due for a correction. The wider economy could tank, taking crypto with it. There's a lot of potential upside in crypto, but it's important to remember that prices can fall to zero.
One way to minimize your risk levels is to maintain a diversified portfolio. That means only putting a small percentage of your overall investments into crypto and keeping a balance of different types of coins in your crypto wallet. You might look at keeping Bitcoin along with a couple of layer 1s, layer 2s, metaverse, and web3 tokens.
It's understandable to be tempted to seek higher returns, and there are some exciting projects out there. Ultimately, only you know your financial goals and appetite for risk. Just don't forget about Bitcoin altogether.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Emma Newbery owns Bitcoin, Ethereum, Polygon, Cosmos, and Audius.