2021 has been a breakthrough year for cryptos. As a result of investors’ appetite for digital currencies during the pandemic, the total market capitalization of the alternative asset class has surpassed $2.6 trillion. As we get ready to welcome 2022, cryptos have become a mainstream investment tool for both individuals and companies.
According to a recent study, there is “evidence of significant growth in both returns and volumes traded, indicating that large cryptocurrencies acted as a store of value during this period of exceptional financial market stress. Further, cryptocurrency returns are found to be significantly influenced by negative sentiment relating to COVID-19.”
As the world hopes to look beyond Covid-19 in 2022, investors wonder how most crypto darlings of the past year could fare in the months ahead. Meanwhile, global regulators are reviewing their stance on these digital assets. The unregulated, decentralized nature of cryptos is seen as a headache by most countries. Yet several other countries are looking into ways to adopt and even create their own digital currencies.
For instance, in September, El Salvador officially accepted Bitcoin (CCC:BTC-USD) as legal tender. Later in November, the country’s president announced plans to build an entire city based on Bitcoin. In the U.S., regulators are also working on a framework for regulation and enforcement of cryptocurrencies.
As a result, we’re likely to hear more about the asset class in the coming months. Let’s take a closer look at three cryptos with real-life utility that could gain further traction in 2022:
Interested readers should remember that digital currencies remain an extremely volatile asset class. It is almost impossible to forecast what the price of a crypto could be in a few days or months. A recent example is the sudden impact of the new Covid-19 variant, omicron, which caused the crypto market to slide in late November. But in the meantime, headlines boosted the price of the Omicron (CCC:OMIC-USD) token by about tenfold.
Cryptos: Cardano (ADA-USD)
52-Week Range: 12.74 cents – $3.10
Market Cap: $44.2 billion
Cardano is a third-generation (3G) open-source blockchain platform. It follows the first- and second-generation blockchains Bitcoin and Ethereum, respectively.
Set up by Ethereum co-founder Charles Hoskinson and officially launched in 2017, the blockchain platform facilitates decentralized applications (dApps). ADA, the native cryptocurrency on the Cardano blockchain, currently ranks as the sixth-largest crypto by market cap.
Regular InvestorPlace.com readers likely know that Cardano relies on the decentralized proof-of-stake (PoS) algorithm to reach consensus on the blockchain. Cardano bulls highlight that it offers a more sustainable, scalable and eco-friendly alternative to Bitcoin, Ethereum or similar altcoins that use a proof-of-work (PoW) protocol.
In November, Luxembourg-based cryptocurrency exchange Bitstamp said it would start listing ADA. However, Israel-based eToro announced it would delist both ADA and Tron (CCC:TRX-USD) in the U.S., a move that caused significant price volatility.
However, despite initial declines in ADA, the downtrend has not lasted long and investors have already recovered some of the losses. But the move by the exchange shows the potential effects of regulatory concerns on cryptocurrencies.
Cardano has been steadily improving its offerings to be a game-changer in DeFi and blockchain. For instance, it recently achieved a milestone by exceeding 20 million transactions with no downtime in more than four years.
The past year’s bullish trend for ADA is likely to continue in 2022. With the latest upgrade, Cardano offers users the ability to execute smart contracts. Even though it is still in the trial phase with some shortcomings, many ADA investors believe it can soon overtake Ethereum as the leading blockchain for decentralized finance (DeFi) and non-fungible tokens (NFTs).
ADA hit an all-time high (ATH) of about $3.10 in early September. The cryptocurrency has gained more than 630% year-to-date (YTD). It currently trades at around $1.33, almost half its peak value in the last 12 months.
52-Week Range: $533 – $4,891.70
Market Cap: $487.1 billion
Launched in 2015, Ethereum is the second-largest cryptocurrency by market cap after Bitcoin. Many popular digital currencies are created on the Ethereum platform, as it facilitates the most widely-used ecosystem supporting decentralized smart contracts.
In addition, about 97% of total NFT sales occur with ETH, the native currency of the Ethereum platform. It also dominates digital financial transactions across all sectors and provides infrastructure for a large part of DeFi protocols.
With the increased popularity of the metaverse, NFTs are also becoming a red-hot topic. For example, in early August, Coca-Cola (NYSE:KO) raised $575,000 in an NFT charity-auction. Additionally, Nike (NYSE:NKE) announced it’s preparing to tokenize ownership for its collectible shoes with NFTs.
In the meantime, the Ethereum 2.0 upgrade to a PoS protocol is scheduled for 2022, which could make the platform more secure and environmentally-friendly. A considerable number of analysts are bullish on Ethereum and suggest it is one of the leading cryptos with a positive long-term outlook.
So far this year, Ethereum has returned more than 450%, significantly outperforming Bitcoin. The altcoin hit an ATH of $4,891 in early November and currently trades around $4,120, down about 16% from its peak value.
Cryptos: Ripple (XRP-USD)
52-Week Range: 17.25 cents – $1.96
Market Cap: $37.9 billion
Ripple is a global ecosystem connecting payment institutions. XRP is the native token of the Ripple protocol and is used to transfer money across borders quickly with very low fees.
In the cryptocurrency universe, Ripple is among the top ten altcoins. Its long-term followers have high hopes that the platform will gradually replace Swift, the current standard for international bank wires. But the altcoin’s rival also works hard. For instance, in July, Swift introduced Swift Go, a new service that can compete with Ripple for faster transactions.
Another hot topic that concerns Ripple investors is the lawsuit between the Securities and Exchange Commission (SEC) and Ripple. Recent news suggest it could possibly extend into early 2022. Ripple bulls are hopeful that a solid rally will follow the end of the lawsuit.
Meanwhile, Ripple continues efforts to grow and expand worldwide. Management recently announced a partnership with the Republic of Palau to develop strategies for “cross-border payments and a USD-backed digital currency for Palau.”
In November, the digital asset also introduced Liquidity Hub, a crypto service for financial companies. The service, set to launch in 2022, will enable clients to offer trading in a selection of cryptocurrencies.
Ripple certainly has long-term fundamental utility and strengths to support the price of its crypto. But the SEC lawsuit is still a significant issue worth watching. A decision in favor of XRP could trigger instant growth, but a negative verdict would likely mean difficult days for the altcoin, at least initially.
XRP currently trades at 79 cents, up 260% YTD but far down from its ATH of $3.40 reached in January 2018. The current level could offer a good entry point for traders whose risk/return profiles allow them to invest in cryptos.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.