Best Cryptocurrencies to Buy in 2022
Cryptocurrency prices have had a difficult start in 2022. Bitcoin , the biggest cryptocurrency in the world, has tumbled to the lowest level since July last year. Similarly, Ethereum, the biggest cryptocurrency in the world, has declined by over 50% from its highest level in 2021. In total, cryptocurrencies have lost more than $1.8 trillion worth of value in the first weeks of the year. In this article, we will look at some of the best cryptocurrencies to buy in 2022.
Why cryptocurrencies retreated
There are three primary reasons why cryptocurrencies have had a difficult start of the year. First, there are concerns that the Federal Reserve will embrace a more hawkish tone in 2022. Such a tone will be a harsh reversal considering that the US inflation has surged to the highest level in over 40 years.
Therefore, a hawkish tone will have a negative impact on cryptocurrencies and other risky assets like the Nasdaq 100 index. Second, there are concerns about the ongoing regulatory crackdown around the world. In January, the Russian central bank provided guidance to the Russian government to ban cryptocurrencies. It warned that these coins were a risk to its monetary policy. Also, it warned about the overall security risks posed by cryptocurrencies.
Finally, there are concerns about valuation of most cryptocurrencies. At their peak, all cryptocurrencies tracked by CoinGecko were valued at over $3 trillion.
Ethereum
Ethereum is the second-biggest cryptocurrency in the world after Bitcoin. It is also one of the most important platforms in the industry. Ethereum provides a platform that developers use to build other decentralized applications.
For example, it is widely used by developers building products in the Decentralized Finance (DeFi), metaverse, and the non-fungible tokens (NFT) industries.
In the past few months, Ethereum has come under intense pressure as the number of the so-called Ethereum-killers increase. Some of these killers are Avalanche, Algorand, Hedera Hashgraph, Solana, and Fantom.
Still, Ethereum has a stronger market share than these platforms by far despite its key challenges. For example, it still dominates industries like DeFi and NFTs.
The main catalyst for Ethereum in 2022 will be the transition from a proof-of-work to a proof-of-stake. Once complete, Ethereum will have faster speeds and significantly lower transaction costs. As a result, there is a likelihood that its price will keep rising.
Bitcoin
Bitcoin price has struggled in 2022 as investors continue worrying about the Federal Reserve and regulations. At the time of writing, the coin is approaching the key support at $30,000.
Still, there are several reasons why Bitcoin will be a good investment for 2022. First, while the current plunge seems worse, the coin has a long history of falling and bouncing back. This rebound will likely happen this year.
Second, a hawkish Federal Reserve poses risks to risky assets like Bitcoin and growth stocks. However, there is a sense in which these fears have now been priced in. For example, most analysts expect that the Fed will implement about 3 to four rate hikes this year.
Still, like in the past hiking cycle, the Fed will likely embrace a gradual pace of tightening. Also, with Bitcoin being down by about 50%, there is a possibility that all these risks have been priced in.
Third, the Russian ban has not been confirmed yet. If it does happen, the impact will be relatively minor as we saw when China banned the coins. Finally, on-chain data suggests that big Bitcoin holders are still not selling. For example, MicroStrategy and El Salvador have said that they will not sell the coins. Therefore, if there will be a cryptocurrency rebound, Bitcoin will lead the way.
Polygon
Polygon is the biggest layer-2 platform in the world. It is a blockchain project whose goal is to improve apps built on Ethereum’s blockchain. Recently, more Ethereum developers have embraced the platform simply because it helps to improve the speed of transactions and reduce their cost. Some of the top apps that have moved to the Polygon ecosystem are Uniswap, Aave, and Curve Finance. According to DeFi Llama, there are about 180 apps in Polygon that have a total value locked of over $4.17 billion. There is a likelihood that Polygon will do well even after the conclusion of the ETH 2.0 rollout.
Summary
There is a likelihood that cryptocurrency prices will bounce back in 2022 as investors embrace living in a high-interest rate environment. Besides, the coins did well in 2018 when the Fed made four rate hikes. In addition to these three, other cryptocurrencies that will do well in 2022 are Cosmos, Chainlink, and Avalanche.
Avalanche is another fast-growing Ethereum-killer while Cosmos has been embraced by over 250 developers. Its Cosmos SDK has been used to build Terra, the second-biggest DeFi platform after Ethereum. Chainlink’s smart oracles are used to link off-chain data to the on-chain ecosystem.