5 Cryptos That Have Gained Over 5,000% in 2021

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Many cryptos have performed well this year, but these five have produced stratospheric gains.

The cryptocurrency industry has produced extraordinary returns this year, with a number of tokens gaining more than 1,000%. But a few cryptocurrencies have gone beyond the extraordinary. If you'd invested $1,000 in any of the cryptos on this list on Jan. 1, it would be worth at least $63,500 today -- or more.

Here are five tokens that have gained more than 5,000% since the start of this year, according to CoinMarketCap data.

1. Axie Infinity (AXS) is up over 22,500%

It's fair to say the popular play-to-earn game has taken the crypto world by storm. Axie Infinity was the first NFT platform to pass the $1 billion sales mark. Axie provided an unexpected source of income for players in countries like the Philippines, Vietnam, Brazil, and Venezuela who were struggling with pandemic-driven economic challenges.

Online gaming is one area where NFTs -- non-fungible tokens -- have proven successful. Each one is a digital collectible with its ownership information coded into the token. In Axie Infinity, players can buy, breed, and fight with cute little Axie NFTs. Unlike other games, the tokens they earn by playing have value in the real world.

2. Fantom (FTM) is up over 15,900%

Ethereum alternatives -- cryptocurrencies with smart contract capabilities -- account for several of the soaring cryptos. Smart contracts are tiny pieces of self-executing code that live on the blockchain. They elevate blockchain networks from being sophisticated ledgers that record transactions to something that is programmable. Ethereum (ETH), the first mover in smart contract capability, has become congested and struggles with high gas fees.

Since the launch of its mainnet in 2019, Fantom has attracted developers with its fast processing capabilities and low fees.

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3. Solana (SOL) is up over 13,300%

Solana is another Ethereum alternative that has captured people's attention. It can process at least 50,000 transactions per second, and is one of the fastest cryptocurrencies on the block. It's found success in recent months with its launch of an NFT collection called Degenerate Apes, and has already attracted several decentralized finance projects.

4. Polygon (MATIC) is up over 8,800%

Solana and Fantom are both layer 1 blockchains, which means they are the base blockchain architecture. The developers behind these projects designed new ecosystems to address the problems faced by Ethereum. In contrast, Polygon is focused on layer 2 solutions.

Layer 2 solutions sit on top of the existing crypto ecosystem -- such as Bitcoin (BTC) or Ethereum -- and improve its performance. Polygon is a layer 2 solutions aggregator for Ethereum, which means it offers developers different options and they can pick the best one for their project.

5. Terra (LUNA) is up over 6,200%

Terra is a payment network that's built on stablecoins, which are cryptocurrencies whose values are pegged to a commodity like the U.S. dollar. Terra has a wide range of stablecoins, such as Terra U.S. dollars (UST) and Euros (EUT).

Terra is an algorithmic stablecoin, and it uses the LUNA token to maintain the prices of these coins through pre-programmed algorithms. Essentially, if the price of a UST rose too high, the algorithm would use LUNA to mint more UST and bring the price down. Unlike a fiat-backed stablecoin, which needs to have cash in the bank to back the tokens it issues, Terra needs a pool of LUNA tokens.

High potential crypto gains also carry risks

Headline-grabbing gains like these are one reason so many Americans have bought cryptocurrency this year. The cryptos above are available from most top crypto exchanges, but be cautious about buying coins based on past performance. As with any investment, make sure you research it thoroughly and evaluate how it could perform in the long term.

It's also important to see beyond the eye-watering returns and remember people have also lost money through crypto investing. Many coins have already failed, and the extreme volatility of cryptocurrency can cause people's assets to halve in value in a matter of weeks. On top of which, the industry has attracted more than its fair share of scams and high-profile hacks.

There are still a lot of unknowns in crypto. For example, we don't yet know what shape increased regulation will take. Most of all, as we saw with the way the internet industry evolved, there's a good chance many of the 13,000 cryptocurrencies on the market today will not succeed in the long run.

Even though the chance of gains of over 5,000% are tempting, long-term investors still need to proceed with caution.

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