Ethereum’s (CCC:ETH-USD) rising popularity relative to Bitcoin (CCC:BTC-USD) may be based on many factors. But, one key reason why Ether has made big progress with “the flippening” is due to its central role in the DeFi, or cryptos decentralized finance. DeFi has fast become one of the hottest areas in crypto.
What exactly is DeFi? The term covers the bulk of financial services transactions (like staking), which are accomplished decentralized from the traditional banking system. Why has Ethereum become so much more popular due to it? Its blockchain is the one predominantly used for DeFi transactions. Mainly due to its smart contract capabilities.
The widespread use of the Ethereum network demonstrates the high utility of its native coin, Ether, or ETH. In turn, this has been what’s been behind its run-up in value. It may have taken a major dive during last month’s crypto market meltdown. But, already partially recovered, it could be set to bounce back further from here.
However, it’s not set in stone that ETH will continue to soar thanks to the DeFi trend. Between native coins from rival blockchains, and other tokens that operate within the Ethereum platform, scores of other cryptos could see much more substantial gains from the trend.
So, which other coins and tokens should you keep on your radar? These seven are major ones that first come to mind:
- Cardano (CCC:ADA-USD)
- Ankr (CCC:ANKR-USD)
- Polkadot (CCC:DOT-USD)
- Chainlink (CCC:LINK-USD)
- Polygon (CCC:MATIC-USD)
- Solana (CCC:SOL-USD)
- Uniswap (CCC:UNI-USD)
Cryptos: Cardano (ADA-USD)
Among the contenders among cryptos challenging the current leader’s DeFi dominance, you could say Cardano is the front-runner. Yes, it still has its work cut for it. It first needs to complete upgrades to allow for features like smart contracts. Once this happens, its blockchain will become a much more competitive alternative to Ethereum.
In turn, usage of its platform in DeFi could pick up considerably. With this increased usage, the price of ADA-USD could start taking off in a big way as well. Not as if it hasn’t seen big gains so far in 2021. At the start of the year, it changed hands for around 18 cents. Even after last month’s crypto meltdown, it trades for more than nine times that, at around $1.66 as of this writing.
Cardano may hold steady, as the overall crypto market figures out whether a further crash is coming. Or, if last month’s roller-coaster ride was merely a near-term correction. But, if it’s smooth sailing from here, this up-and-coming altcoin could start to rise further ahead. To the $2 price level, and to price levels well beyond that.
Keep in mind, though, that its DeFi catalyst will take time to play out. With its smaller market capitalization than Ether, it could experience greater volatility if crypto markets get rocky once again. Yet, for investors betting big on DeFi, and the rise of non-Ether coins, consider this one of your best options.
Ankr may be hosted on the Ethereum network. With this, it’s a bit different than, say, other altcoins that operate their own blockchains. With this, it’s likely not in the running to supplant it. Yet, this token could still see a significant run-up in value, relative to ETH-USD, going forward.
How so? If it becomes more widely-used in transactions such as staking. What’s going to be a factor that may catapult its use? The unique way in which this crypto’s distributed computing platform operates. Basically, the platform utilizes excess computing capacity from participants, who in exchange receive ANKR-USD as compensation.
A possibly simpler and less costly method for deploying new blockchains, DeFi participants may opt to use it in lieu of Ether. In turn, this increased usage could spark continued upward movements in the price of the ANKR-USD token. There’s big potential here. But, keep in mind that it may take time to fully play out.
It pulled back a considerable amount from its highs set shortly before May’s crash (from nearly 20 cents, to around 10 cents). Yet, while a smaller (market capitalization of just $700 million), and therefore a highly-volatile digital asset, it won’t take much to drive a resurgence of interest.
Cryptos: Polkadot (DOT-USD)
There are scores of altcoins trying to get to the level of ETH. But, many of them have one factor in common. That could be their attempts to build a blockchain that answers many of the issues associated with Ethereum. As InvestorPlace’s Mark Hake discussed June 2, that’s a major part of the story here with Polkadot.
Polkadot is building a blockchain that provides greater security and scalability than the most popular blockchain currently offers. Appreciation of its growing utility is catching on fast. This is clear from DeFi startups, such as banking app Current, integrating one of its key platforms (Acala) into their respective applications.
DOT-USD is an altcoin that took off like a rocket this year, only to lose substantial ground from the recent meltdown. But, while down by about half off its highs, it’s still up nearly three-fold (around $24) from where it was at the start of the year.
Despite being one of the more obscure DeFi-focused altcoins, it already sports a $26 billion market capitalization. Its potential to gain may be muted compared to some of the smaller cryptos listed here. Even so, as it’s another name that could grab a big share from Ethereum, consider it another one to keep an eye on.
Why has interest in LINK-USD accelerated lately? First, let’s answer the first question: what is Chainlink? It’s a blockchain oracle. In layman’s terms, its a third-party platform that provides external (off-network information) for smart contracts.
The technology behind Chainlink was instrumental in making Ethereum the leading name in smart contracts. But, its platform is not limited to only this blockchain. And, that’s a key factor in why LINK, this blockchain oracle’s native token, could benefit, as the world of DeFi becomes much less ETH-centric.
In theory, if more blockchain platforms use its technology to upgrade their smart contract abilities, the price of LINK-USD could rise. And, so far, this has played out, as seen from its price going from $12 to around $27.30 year-to-date. But, as a Seeking Alpha contributor discussed back in January, it’s uncertain how the increased use of Chainlink’s technology will parlay into higher prices for its native token.
This may explain why investors in cryptos have not bid this up as dramatically as they have with other coins/tokens. The potential for gains could be more limited with this situation. Yet, with the rising importance of smart contracts, it still stands to see a major boost from today’s prices.
Cryptos: Polygon (MATIC-USD)
What’s the story with Polygon? In so many words, it’s trying to beat Ethereum at its own game. Similar to cryptos Cardano and Polkadot, the platform (formerly known as Matic Network) is trying to beat the most-widely used blockchain when it comes to speed, efficiency and fees.
So far, it seems to be crushing it with its efforts. Transactions using its blockchain can be done much quicker, using less computing power, and with lower fees. Scores of dApps (decentralized applications) are seeing its many advantages.
That’s why its native coin, MATIC-USD, was able to recover so quickly from the events of last month. With so much momentum shifting over to it, does this mean another big breakout is around the corner? Yes and no. If the cryptos market is stabilizing, and the DeFi trend isn’t even close to slowing down, we could see more upward price movement in the near term. Yet, things could still go in the wrong direction.
The much-touted upcoming upgrades to Ethereum could lessen the appeal of this alternative. Even if the market for cryptos get back in bull-market mode, it may be more than enough to knock it back down to the sub-$1 per share prices it traded for as recently as April. Tread carefully, but this still remains a front-runner in the race to beat out ETH.
Why is SOL-USD becoming so hot among crypto aficionados? One word: speed. This crypto’s blockchain can currently handle 1,000 transactions per second, which makes Ethereum (which can only process 15 transactions per second) seem as fast as a dial-up modem. And, that’s not all. As it continues to build itself out, Solana could become faster by an even greater magnitude.
What’s behind Solana’s ability to operate at such high speeds? Its use of “proof of history,” rather than “proof of stake” or “proof of work,” in transactions. With this innovation, it could be on the verge of taking the mantle from Ethereum, in the same way Ethereum took the mantle from Bitcoin.
But, before you rush out and buy it, consider some recent advice from InvestorPlace’s Luke Lango on how to approach Solana. As Lango recently discussed, Solana’s technological advantages give it a shot at joining the ranks of the established coins. In other words, become the ultimate “Ethereum killer.”
But, this doesn’t guarantee it’ll see widespread adoption. Until this crypto gains critical mass, it may be too soon to say its blockchain will become the new leader, and its price will soar substantially from today’s prices.
Cryptos: UniSwap (UNI-USD)
UNI-USD is the governance token of UniSwap, a decentralized crypto exchange that operates on the Ethereum blockchain. Where does the token come into play? It is used to incentivize participants to provide liquidity (in essence, serve as market makers). As dApps have soared in popularity, so has the price of Uniswap’s token.
Trading for as low as 42 cents after its debut last fall, prices went parabolic earlier this year, during the mad rush into anything related to cryptos. Hitting prices nearing $45, it too saw major volatility during the mid-May crypto market meltdown. Briefly falling under $20, it’s partially recovered. So, what could help UNI-USD not only get back to its past highs, but zoom to even higher price levels as well?
As the decentralization trend continues, and dApps such as UniSwap continue to take off, increased usage of the token could mean higher prices. Add in the built-in supply constraints (initial supply of 1 billion, to increase 2% per year going forward), and there may be a path for it to rapidly increase in value in the coming years.
Even so, given its still in its early stages, this may mean a greater level of volatility. But, as the blockchain sphere gets ever more sophisticated, this token offers up strong potential for gains along with its high risk.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.