Key takeaways:
- Cryptocurrencies are incredibly volatile and not for all investors. Decide if they fit your risk tolerance before diving in.
- Bitcoin and Ether are in a league of their own as the two best cryptocurrencies to buy.
- Four more speculative cryptos are worth a look, each with their own defining characteristics.
In a span of just 15 years, cryptocurrencies emerged from obscurity to become an important part of financial markets. But there’s one thing the industry’s evolution hasn’t eradicated: extreme volatility.
At its peak in November 2021, the crypto market was worth upwards of $2.9 trillion. By mid-2022, hit by rising inflation and an aggressive rate-hiking cycle by the Federal Reserve, the entire market was worth less than $900 billion. Fast forward to Feb. 29 of this year, and cryptocurrencies collectively were worth more than $2.3 trillion.
That’s quite a roller coaster. If you’re not willing to endure such violent swings, you simply shouldn’t own cryptocurrencies. And if you do get into crypto, there are thousands of coins to choose from, each one with different dynamics. It’s daunting. Here are six of the best cryptocurrencies to buy now:
Cryptocurrency is an incredibly nascent asset class, with origins only dating back to 2009. Extreme volatility is par for the course, so investors looking to insulate themselves from the potential total collapse of their holdings will want to go with more established names. None is more established than Bitcoin, the first cryptocurrency and largest by market capitalization with a valuation of about $1.2 trillion, or roughly 53% of the overall market.
BTC boasts the most mainstream acceptance of any of the top cryptocurrencies, as evidenced by the January debut of 11 new Bitcoin exchange-traded funds, or ETFs. The fight with the Securities and Exchange Commission to approve spot Bitcoin ETFs was years in the making, but the approval finally materialized. Bitcoin ETFs have ushered in a new chapter for the leading crypto, as mainstream investors can now track its performance without having to directly own the “digital gold” itself.
After languishing below $17,000 at the beginning of 2023, just over a year later Bitcoin now trades for upwards of $62,000, having fiercely rallied in the early months of 2024. Through Feb. 28, Bitcoin prices were up 47.9% year to date, driven largely by the approval of spot Bitcoin ETFs, which quickly attracted billions of dollars in assets under management.
Second by market capitalization is Ether, which is the native token on the widely used Ethereum blockchain. Often colloquially referred to as Ethereum, ETH’s market cap is about $417 billion and accounts for nearly 18% of the total cryptocurrency market. Unlike Bitcoin, Ether’s underlying network is far more than just a tool for peer-to-peer payments; the Ethereum blockchain is custom-made for smart contracts and decentralized finance tools, as well as for so-called web3 applications and the trading of non-fungible tokens, or NFTs.
While Bitcoin only functions as a speculative asset and a store of value, Ether has inherent utility as the native token of a wildly popular network. Plus, Ethereum’s switch in recent years from the energy-inefficient proof-of-work protocol to the much more efficient proof-of-stake system gives it a leg up on BTC in an increasingly environmentally conscious world.
Like BTC, ETH is up sharply so far in 2024, surging 48.4% through Feb. 28. These two cryptos are undoubtedly the best in their asset class. Some market watchers speculate that Ethereum ETFs will be the next step in crypto’s mainstream adoption, and if any digital currency is next in line, it’s undoubtedly Ether.
When investing in cryptocurrency, investors should understand that it’s Bitcoin and Ether in their own tier, and then there’s everything else. AVAX and the following altcoins on this list all have more risk, and investors should factor that into their decisions. Consider them purely speculative wagers.
Caveats aside, the Avalanche network’s AVAX token earns its place on this list by virtue of the ambitious goals of the Avalanche blockchain.
Avalanche’s subnets feature allows users to deploy their own mini-blockchains on top of its network. Developer Ava Labs envisions a future in which most mainstream commercial entities and even many individuals will want their own blockchains, with Avalanche subnets offering a convenient solution to that problem. If that reality materializes, then AVAX, which plunged 90% in 2022’s bear market, could emerge as a longer-term winner.
AVAX has surged over the past year, jumping about 136% from $17 to $40. Its momentum has been less evident in the early days of 2024, with AVAX up 4.5% year to date through Feb. 28. It currently has a market capitalization of more than $16 billion.
Excluding stablecoins, MATIC is now the 12th-largest cryptocurrency by market cap, with a capitalization of about $10 billion. Still constituting less than 0.5% of the overall market size, Polygon has plenty of room to grow. That said, its future success is largely tied to the acceptance and ongoing usage of the Ethereum network. That’s because the Polygon network is a scaling platform that aims to increase the capabilities of Ethereum, allowing it to eventually run a potentially limitless number of decentralized applications, or dApps.
Like practically all other tokens, MATIC’s price suffered in 2022, losing 70% of its value in the year. It’s nowhere near its late 2021 highs currently, but MATIC, an old-school crypto by the market’s standards, could be a turnaround candidate. It’s up 4.1% this year through Feb. 28. As part of its Polygon 2.0 plan, the project will upgrade its native token from MATIC to a new token called POL, though the prices of these tokens should be identical and exchangeable on a 1-for-1 basis.
Founded in 2017 by Ethereum co-founder Charles Hoskinson, Cardano is a proof-of-stake blockchain and one of the largest blockchains to successfully run that more energy-efficient protocol. Cardano aims to foster a developer-friendly ecosystem for dApps. Unlike Ethereum, Cardano has a hard cap on the number of coins that can ever exist, topping out at 45 billion. Thankfully for investors, around 36.7 billion, or more than 81%, of that supply has already been issued, meaning the amount of overall dilution remaining is both known and relatively limited.
One of the best cryptocurrencies to buy now, Cardano shed 81% in 2022 but has managed to nearly triple since the beginning of 2023, when it was trading for 25 cents. ADA now trades for roughly 69 cents and boasts a market cap of more than $24 billion. Cardano is up 6.2% year to date through Feb. 28.
Last and least valuable by market cap is ATOM, the native token of the Cosmos Hub blockchain. ATOM is more than just a means for securing the network. It’s also a governance token, giving holders a say in how the Cosmos ecosystem should evolve. One issue with the nascent cryptocurrency space is that there are so many different, independent blockchains. This is a challenge that Cosmos aims to alleviate by making inter-blockchain communication easier, faster and less expensive. Cosmos’ ultimate aspiration is to make blockchain technology more accessible for both coders and end users, which could pay off if blockchain tech becomes as ubiquitous as some optimists in the space expect.
ATOM, at a current valuation of roughly $4.6 billion, lost 71% in the 2022 bear market. Like most cryptos, it has yet to recover from those losses. ATOM is up 7.7% year to date through Feb. 28.
