Over the past decade, cryptocurrencies have rapidly grown from a novel concept to a major presence in financial markets. However, one aspect of the crypto landscape that has persisted is intense volatility. After a series of high-profile failures and scams, the cryptocurrency market lost 63% of its value in 2022.
Bitcoin (BTC)
As the original and largest cryptocurrency, Bitcoin comprises nearly half of the total crypto market value at around $570 billion.
Bitcoin has achieved the most widespread adoption among major cryptocurrencies, with various publicly traded products tied to its price. Several public companies like MicroStrategy and Tesla also hold Bitcoin on their balance sheets. While BTC plummeted 64% over the course of 2022, it has mounted an impressive rebound so far in 2023.
Bitcoin’s early 2023 recovery accelerated in March when the government guaranteed full access to deposits at failed Silicon Valley Bank. The federal intervention to backstop the tech and startup-oriented lender bolstered faith in both the banking system and cryptocurrencies.
Ethereum (ETH)
Ethereum is the second-biggest cryptocurrency with a market value of about $221 billion, making up 19% of the total crypto market. It is the native token of the Ethereum blockchain. Though often informally referred to as Ethereum, Ether is distinct from the Ethereum network itself. While Bitcoin was designed mainly for payments, Ethereum has broader functionality including smart contracts, dApps, NFT trading, and other Web 3.0 applications.
With real utility as the native token powering a massively popular blockchain, Ether has more inherent value than Bitcoin’s role as a speculative asset and store of value. Ethereum’s recent upgrade to the energy-efficient proof-of-stake protocol also gives it an environmental edge over Bitcoin’s power-hungry proof-of-work. So far in 2023 through August, ETH has gained 53.7%.
Avalanche (AVAX)
When looking at cryptocurrencies, investors should recognize Bitcoin and Ether as the top tier, with all other altcoins carrying more risk. With that caveat in mind, Avalanche’s AVAX token makes this list due to the ambitious vision behind the Avalanche blockchain.
A key feature of Avalanche is its subnets, which let users deploy customized mini-blockchains on the network. The developers at Ava Labs envision a future where most major companies and even individuals want their own blockchains, with Avalanche subnets providing a convenient solution. If this comes to fruition, AVAX could emerge as a long-term winner after its 90% plunge amid 2022’s bear market. So far in 2023 through August, AVAX has risen 15%.
Polygon (MATIC)
Excluding stablecoins, Polygon’s MATIC token is currently the 10th-largest cryptocurrency by market capitalization at over $6 billion. Still less than 1% of the total crypto market, Polygon has ample room for growth. Polygon’s success depends on growing adoption of Ethereum, since Polygon aims to scale Ethereum by expanding its ability to support a vast number of decentralized apps (dApps).
Like most cryptocurrencies, MATIC’s price fell 70% in 2022’s bear market. It rallied around 20% in early 2023 amid the broader crypto recovery, but those gains reversed after the SEC filed a lawsuit against Coinbase claiming MATIC and other altcoins were unregistered securities. Following the news, MATIC declined and is now down 10.2% year-to-date through August.
Cardano (ADA)
Cardano was created in 2017 by an Ethereum co-founder. It uses an energy-efficient proof-of-stake protocol and aims to build a developer-friendly ecosystem for dApps. Unlike Ethereum, Cardano has a hard limit of 45 billion coins. This benefits investors since 78% of the supply is already circulating, so dilution is constrained.
Despite losing 81% of its value in 2022, Cardano has rebounded 21.5% this year. With a capped supply and energy-efficient design, it is a promising cryptocurrency.