This Altcoin Gained Over 3,000% in 2021 -- and Could Skyrocket in 2022
Avalanche is a smart contract crypto that's going places.
- Avalanche gained over 3,000% last year, taking it to 10th place in terms of market cap.
- Avalanche is a smart contract crypto that boasts the fastest time to finality in the industry. Finality is the point where a transaction is irreversible.
The cryptocurrency industry had an incredible 2021. The total market cap -- the amount of money invested in crypto -- stood at about $770 billion on Jan. 1 and finished the year at $2.25 trillion. And various individual cryptos outperformed the market. For example, smart contract crypto Avalanche (AVAX) gained over 3,000% across the year, taking it to 10th place in the crypto charts.
Avalanche launched in 2020 and quickly became a serious player in the crypto space. It has a strong team behind it in the form of Ava Labs and has also secured investment from major players such as Polychain and Three Arrows Capital.
Here are some of the reasons Avalanche could skyrocket in 2022.
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1. It's a programmable crypto
Programmable cryptos are the building blocks of the crypto industry. These are whole ecosystems where other applications and cryptocurrencies can be built. Ethereum (ETH) was the original smart contract crypto, but it struggles with network congestion and high fees. As a result, a number of Ethereum alternatives have grown in popularity -- including Avalanche.
It is early days and it isn't clear which smart contract cryptos will come out ahead. But these networks will be at the heart of any upcoming developments in the crypto industry. Whether it's metaverses, decentralized finance, Web 3, or non-fungible tokens (NFT), they all run on smart contract platforms.
We don't yet know which of these sub sectors will blossom, nor do we know for sure which individual projects will succeed. But we do know smart contracts are the secret sauce that powers all of them, making the platforms themselves a solid investment choice.
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2. It has the fastest finality time
There are a few different metrics we can use to evaluate programmable cryptocurrencies. These include transactions per second (TPS) and time to finality. The time to finality is the length of time it takes for a transaction to become permanent and irreversible. It's a bit like how a credit card payment is listed as pending on your account before it's completely finalized.
Avalanche says it is the fastest platform when it comes to finality. According to its site, Bitcoin (BTC) has a time to finality of about 60 minutes, whereas Avalanche's is less than two seconds. It achieves this by having three interconnected blockchains, each of which serves a different purpose.
3. It already has more total value locked than Solana (SOL)
Another key metric when looking at cryptos is total value locked -- the amount of money that's been deposited on all the applications on that network. According to DeFi Llama, Avalanche has around $9 billion locked on its system, putting it in 4th place ahead of Solana, another one of last year's top-performing cryptos. It still has a way to go to catch up to Ethereum, which tops the list with about $126 billion on its network.
What's interesting is that decentralized finance projects that were originally built on Ethereum, like Aave (AAVE), Curve (CRV), and SushiSwap (SUSHI) are now also running on Avalanche. So, for example, traders can now use the SushiSwap decentralized exchange without having to pay exorbitant Ethereum fees.
Avalanche also announced a strategic alliance with Deloitte at the end of last year. Deloitte will use Avalanche's blockchain to help state and local governments demonstrate their eligibility for federal emergency funding. The Close As You Go platform helps officials streamline disaster reimbursement applications to the Federal Emergency Management Agency.
Wider market conditions may dampen growth
If you're considering buying Avalanche, it is available from most of the top cryptocurrency exchanges. However, make sure you do your own research and only invest money you can afford to lose. This is still a relatively new industry and cryptocurrency prices can be volatile.
We've covered some of the reasons to be optimistic about Avalanche. But it's also worth considering what's happening in the wider crypto market. Prices have slumped in recent months, primarily due to tightening economic policies around the world. People are pulling out of riskier investments like crypto. Depending on how the economic situation evolves, crypto prices might not see the same extraordinary growth they did last year.
There's also the spectre of increased regulation. In the long term, regulation could help bolster investor confidence and remove some of the bad actors in the market. But in the short term, regulatory moves worldwide may hit crypto prices even harder. As a result, it's important to see any crypto investment you make now through a long-term lens. The question is not whether AVAX can skyrocket in 2022, but whether it can perform well in the coming five to 10 years.
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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 Avalanche, Ethereum, Solana, Aave, and Curve.