Cryptocurrencies market participants (and those who only plan to master this area of investment) are constantly faced with the question of which asset is less risky to invest in. After all, at the beginning of February 2022, there were over 17 thousand cryptocurrencies in the world.
WorldBTS analyzed the “successes” of the largest cryptocurrencies in terms of capitalization in 2021 and tried to determine their strengths and weaknesses together with experts. Apart from bitcoin, the assets considered included Ethereum, Tether, BNB, XRP, Cardano, Solana, Terra and Avalanche.
Market capitalization: $723 billion
Maximum: $68,900 (November 10, 2021)
The year 2021 was quite active for bitcoin — the first cryptocurrency set several records, but each time it rolled back for correction. This process continues as of February 2022: BTC has fallen by 46% since its last high.
Unlike all other cryptocurrencies, Bitcoin, according to analysts, is globally less dependent on technical indicators. Since the coin is quite stable and is one of the popular risk hedging methods, it is more likely to be influenced by fundamental factors. These include decisions of the US Federal Reserve and other countries’ financial regulators, interest from institutional investors and the situation in the geopolitical arena.
Market capitalization: $312 billion
Maximum: $4,866 (November 10, 2021)
Because of Ethereum’s traditionally high correlation to bitcoin, the largest altcoin typically follows the movements of the first cryptocurrency. According to CoinMetrics, this ratio reaches 0.9 as of February 22.
In addition, the rate of ETH is also affected by updates to this blockchain. For example, in 2022, the Ethereum network plans to completely move away from Proof-of-Work consensus and switch to Proof-of-Stake, which means abandoning mining and switching to stacking. News regarding this update is one of the primary drivers of the asset’s price, experts say.
Market capitalization: $79.4 billion
Maximum: $1.32 (July 24, 2018)
USDT is a stablecoin, that is, a cryptocurrency backed by another asset. In this case, a dollar at a rate of 1:1. Since its emergence in 2015, it has been highly stable, due to which it is widely used for the purpose of cryptolending (analog of a deposit in a bank) and, like bitcoin, risk hedging.
On the other hand, with respect to stablecoin, it is necessary to be vigilant about news regarding central bank currencies (CBDC), according to experts. Despite the fact that steible coins and central bank currencies have different tasks globally, they do have common goals. Namely, accumulation, payment function and minimum volatility. What matters is how central banks in different countries will assess stablecoin in conjunction with the creation of CBDC, analysts clarify.
Market capitalization: $60.6 billion
Maximum: $686.31 (May 10, 2021)
In the 9.5 months since its record, the cryptocurrency Binance Coin has not only changed its name to BNB, but also lost almost half of its value, falling to $358. At the same time, the main pricing factor for altcoin is its deflationary nature — coins are not only regularly burned by the issuer, but also with every transaction.
Market capitalization: $32.8 billion
Maximum: $3.40 (Jan. 7, 2018)
XRP is one of the few major crypto-assets for which 2021 passed without any bright spots or new records. On the wave of the market’s rise in May, the coin nearly rose to $2, almost half its high, and has been in a downtrend ever since.
One of the main negative factors affecting XRP is the litigation between the cryptocurrency’s issuer, Ripple, and the U.S. Securities and Exchange Commission. The regulator accused top executives back in December 2020 of unregistered sales of $1.3 billion worth of securities under the guise of XRP.
Market capitalization: $27.9 billion
Maximum: $3.09 (Sept. 2, 2021)
September was a banner month for ADA as it crossed the $3 per coin mark for the first time ever.
In the long term, the implementation of the project roadmap is a guarantee of an uptrend. In addition, Cardano’s blockchain’s increased performance and throughput may have a positive impact on the price.
Market capitalization: $26.3 billion
Maximum: $259.96 (Nov. 6, 2021)
Solana started last year rather sluggishly — the rate fluctuated around $1.6, but already in May it exceeded $50. Curiously, the value of the asset was not affected by the spring collapse of the crypto market and new records were waiting for SOL in September and November.
Thanks to its ties to the fields of NFT and decentralized finance (DeFi), SOL remains on a wave of momentum. Its adoption by decentralized application platforms (dApps) could also have a positive impact on the token.
Market capitalization: $19 billion
Maximum: $103.34 (May 10, 2021)
Thanks to Terra’s adoption by the decentralized finance sector (its dominance in the sector rose from 0.2% to 7.5% in 2021), the coin’s value rose hundreds of percent, and at its peak in May increased tenfold. But on a wave of correction of the crypto market as a whole, the value of the asset has almost halved.
If Ethereum’s share of the DeFi market is absorbed, Terra will have great growth prospects. At the same time, the connection of this ecosystem with Magic Internet Moneu (MIM), as well as the connection of its partner protocol Abracadabra with the scandalous DeFi project Wonderland, causes negative attitude to Terra.
Market capitalization: $16.9 billion
Maximum: $144.96 (Nov. 21, 2021)
During the year, the amount of funds blocked in this young smart contract (it appeared only in September 2020) increased 15 times — from $72.4 million to $11.8 billion. Against this background, the rate of the asset increased 5 times during the year and renewed its historical maximum.
The record was set on the background of important news. Blockchain development team Avalanche Ava Labs partnered with consulting firm Deloitte to improve the safety, speed and accuracy of the U.S. Federal Emergency Management Agency.
At the same time, it should be kept in mind that cryptocurrencies are an extremely volatile asset type — a bad investment can cause an investor to lose it entirely. Therefore, investments are made solely at one’s own risk.