We are on a wild ride with Bitcoin (CCC:BTC), so please keep your hands, feet, arms and legs inside. After hitting an all-time high above $58,000, the leading crypto plunged to $48,000 amid bearish calls from analysts and Elon Musk. But the story is likely far from over. With growing mainstream support, investors should be looking for the next cryptocurrency to explode in 2021. Here is what you need to know right now.
Essentially, everything has been working in favor of cryptocurrencies. Legendary investors continue to buy in, and even Tesla (NASDAQ:TSLA) purchased a $1.5 billion stake. Financial institutions are integrating digital currencies, and you can now buy a house or even a private island with your crypto wallet. On Friday, the first Bitcoin exchange-traded fund in North America launched to roaring success, perhaps paving the way to a sister fund in the U.S. In short, these headlines combined to push Bitcoin to a new all-time high. They also created a rally in a series of lesser-known cryptocurrencies.
Then, BTC hit the breaks as bearish Bitcoin price predictions poured in. Musk, a fan of cryptocurrencies, tweeted some concerns about current valuations. Are BTC and Ethereum (CCC:ETH) really too high? Regardless of the answer, Bitcoin, Ethereum and many of their peers started to tumble.
Where we stand now, Bitcoin has trimmed its losses and is down roughly 5% over the last 24 hours. While that speaks to the power still behind the name, it also opens the door. Investors still want to find the next cryptocurrency to explode in 2021.
If you want to get in on the ground floor, keep these five tokens in mind.
Next Big Cryptocurrency No. 1: Cardano (ADA)
One of the biggest gainers over the weekend was Cardano (CCC:ADA), fueled by hopes that the token will be the next cryptocurrency to explode. While Kevin Reynolds wrote for CoinDesk that much of the altcoin rally stems from hopes of finding the next biggest token, there is also quite a good deal of social media hype. For instance, KISS frontman Gene Simmons announced last week that he purchased $300,000 of ADA. This comes after similar purchases of altcoins, including Dogecoin (CCC:DOGE).
So what should investors make of Cardano? Many bullish price predictions stem from its opportunities in decentralized finance. At the start of 2021, some experts were putting price tags near $2 on ADA. This comes as more and more mainstream consumers look for DeFi solutions, and as financial institutions make crypto integrations. Plus, Charles Hoskinson, the founder of Cardano, thinks some pretty big things are in store for ADA.
In a recent interview, Hoskinson said that Bitcoin is only so successful because of its popularity. In other words, as a crypto, it does not have that much going for it. By contrast, Hoskinson thinks altcoins like his Cardano offer more in terms of tech. Therefore, he predicts that an altcoin will soon dethrone Bitcoin as the leading cryptocurrency. If that happens, Cardano is certainly one to watch.
The story here with Polkadot (CCC:DOT) is similar. Like Cardano, Polkadot saw major moves in recent days, and especially over the weekend. This comes as investors look for the next cryptocurrency ready to explode in 2021, and for so-called ground-floor entrance points to the space. Plus, like Cardano, many see Polkadot as a more technologically advanced investment.
As InvestorPlace contributor Tom Taulli wrote, Gavin Wood, the former CTO of the Ethereum Project, founded Polkadot. Essentially, he wanted to create a platform that would be better handle complex distributed environments. This means that there are multiple blockchains that operate at the same time.
Consider this another long-term competitor to leading names like Bitcoin and Ethereum. As Polkadot continues to grow and DOT price predictions improve, this is certainly a crypto to keep on your radar. Early data even suggests that institutional clients are diving into a Polkadot exchange-traded product.
Next Big Cryptocurrency No. 3: Chainlink (LINK)
As Taulli writes, the complexity of Chainlink (CCC:LINK) is one of its biggest strengths, and one of its biggest weaknesses. Unlike other cryptocurrencies that run on one blockchain, Chainlink runs on a variety of blockchains for smart contracts. This means it can power heavier applications. However, it also means that it may need serious support due to its technological complexity.
That double-edged sword was not holding Chainlink back this weekend, though. In fact, it hit an all-time high of its own as Bitcoin rallied. And looking to the future, LINK should definitely be on your radar. CoinDesk notes that it is already widely used by DeFi protocols, and that should continue to increase.
Thanks to the GameStop (NYSE:GME) rally, which saw Robinhood levy trading restrictions, many more investors are interested in DeFi. That should light a match for existing cryptos like Chainlink.
Stellar Lumen (XLM)
The story with Stellar and Lumen (CCC:XLM), its native cryptocurrency, is very interesting. To start, the project shares co-founder Jed McCaleb with Ripple and its crypto, XRP (CCC:XRP). And even beyond that, both have a similar mission. As financial institutions stand right now, it can be difficult to transfer money across country borders. Not only is it expensive, but it can be tricky to navigate and time consuming. Lumen and XRP both aim to solve parts of this problem. Both rely on the distributed ledger system, and both facilitate easy payments.
As Mary Ann Callahan highlights, one key difference is that Ripple and XRP are more geared to banks. Lumen on the other hand, is more aimed at everyday people. Therefore, Stellar and its XLM crypto target people, especially in emerging economies, hoping to bring them online to financial systems. Especially with big names like Jack Dorsey betting on the relevancy of cryptos in emerging economies, that sounds like an interesting bet.
What else should you know? As Callahan points out, many people see it as a battle between XRP and XLM. While Stellar Lumen has benefitted from a U.S. Securities and Exchange lawsuit against Ripple, XLM looks like an appealing bet no matter what.
Next Big Cryptocurrency No. 5: NEM (XEM)
One last cryptocurrency that could explode in 2021 is NEM (CCC:XEM). In fact, NEM has already exploded, up 180% for the year so far. Although this is a crypto that typically flies under the radar, its recent gains are bringing it some attention. And the backstory here is interesting enough that you should pay attention.
Essentially, NEM launched in 2015 as a fork from a different project. It powers a Smart Asset System, and is written in Java. Also importantly, it has goals that go beyond a digital currency. Experts say that it hopes to revolutionize crowdfunding, legal records, healthcare data, supply chains and so much more. For investors, this means that the growing interest in DeFi should make NEM stand out.
What else is there to know? Price predictions for XEM are mixed, and it does not receive a ton of mainstream attention. However, recent price action means you should do your homework with this potentially up-and-coming name.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.