Here are some coins to keep on your radar this year -- whether as potential investments or because they could impact the whole industry.
2021 was an extraordinary year for the cryptocurrency industry. There are now more coins, more investors, more crypto exchanges, and more money than ever in crypto. With over 16,000 cryptocurrencies to choose from, it's hard to pick out just a few.
To help focus our list, we've split the cryptos into sub sectors. Looking at coins by sectors is a good way to ensure your portfolio is diversified and not overly weighted toward one or two types of coins.
The right coins for you depend on what type of an investor you are. Some people are willing to take higher risks in return for higher potential rewards. Others are looking for safer long-term bets. Either way, these 11 altcoins are worth watching in 2022:
Layer 1 cryptos
Layer 1 cryptos are the backbone of the crypto industry. Right now many of them are competing for market share, and the most likely scenario is that four or five will eventually come out ahead.
1. Ethereum (ETH)
In theory, 2022 is the year that Ethereum finishes its Eth 2 upgrade to make it more scalable and more sustainable. It isn't yet clear whether Ethereum can deliver on time and without any major glitches. Either way, investors need to pay attention. If the upgrade goes well, it will be positive for the whole market. If it goes badly, it could have a knock-on effect for many of the crypto projects that run on its network and reduce overall investor confidence
2. Solana (SOL)
Solana is one of the superstars of 2022, but the big question is: Can it keep growing? Its speed and cheap transactions are attracting a lot of developer interest, and it may continue to lead the Ethereum alternatives. However, it has already had a couple of technical issues and it isn't clear if it can maintain its momentum.
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3. Elrond (EGLD)
Elrond is an interesting smart contract crypto that has seen considerable growth, but has not yet hit the highs of Solana and could still have space to grow. It's worth watching the development of its Maiar decentralized exchange and the number of projects its ecosystem can attract.
4. Cardano (ADA)
Some find Cardano's research-driven approach less exciting, but it can also appeal to long-term investors. The project is actively looking to solve problems that might arise in the future, such as the impact of quantum computing. It already has several real world projects, and following the launch of smart contract capability earlier in 2021, we're likely to see the rollout of several new projects on Cardano.
Layer 2 and interoperability cryptos
Layer 2 solutions sit on top of existing blockchains to improve their performance, while interoperability projects help different networks communicate with one another.
5. Polkadot (DOT)
2021 saw the rise of a host of Ethereum alternatives that offered faster and cheaper transactions. Polkadot performed well, but the problem it solves -- interoperability -- is still an issue. Right now we have several popular blockchain networks that aren't good at talking to each other. As developers start to use a number of layer 1 blockchains, interoperability will be crucial.
6. Polygon (MATIC)
Polygon aggregates Ethereum layer 2 solutions. Until the Eth 2 upgrade is completed, it can help existing projects to reduce costs and solve issues with network congestion. Even after the upgrade, it will still have a role to play, especially when it comes to interoperability.
Several metaverse and gaming tokens like Axie Infinity (AXS), Decentraland (MANA), and Sandbox (SAND), produced eye watering returns in 2021. Everybody is looking for the next big thing, and these two are worth watching:
7. Enjin (ENJ)
In gaming and the metaverse, non-fungible tokens (NFTs) give people more control over their in-game assets. This is one reason NFTs were another key trend in 2021. Outside gaming, they can take the form of anything from art to music to domain names. Enjin makes it easy to create and manage NFTs, especially for gamers.
8. Wilder World (WILD)
Wilder World calls itself "an immersive 5D metaverse." Unfortunately, it's not yet listed on many major U.S. cryptocurrency exchanges. But with several play-to-earn games and an interesting community-based take on metaverses on its platform, it is worth having on your radar.
DeFi tokens
Decentralized finance is one of the key uses of blockchain technology so far. It allows people to cut the middleman out of all kinds of financial transactions. However, there's also a strong likelihood that DeFi is going to see increased regulation worldwide and the space can change in a heartbeat. As a result, I've only put one of these coins on this 2022 watchlist.
9. Terra (LUNA)
Terra was another of the top performing cryptos in 2021, but its stablecoin-based financial ecosystem continues to grow. It has several different stablecoins pegged to different currencies, all underpinned by its LUNA token.
Other altcoins
It's worth keeping an eye on the following coins which could have an outsized impact on the rest of the crypto industry.
10. XRP (XRP)
XRP -- also known as Ripple -- struggled a little in 2021 due to an ongoing lawsuit with the SEC. The SEC accuses it of operating as an unregistered security, which Ripple's team contests. If the SEC wins, it could destabilize the whole industry as the SEC may then take action against a number of other crypto projects.
11. Tether (USDT)
I avoid using the Tether stablecoin and would not recommend buying it because it is not transparent enough about its reserves. But I still pay attention because it's the fourth biggest crypto by market cap. If Tether collapses, the shockwaves could shake the industry.
The price of a stablecoin is pegged to a different commodity such as gold, or in Tether's case, the U.S. dollar. In theory, each USDT should be backed by $1 in reserve. That way, there'd be enough cash to pay out if lots of people decided to withdraw their USDT all at once. The problem? Tether holds a lot of its reserves in unspecified commercial paper -- a type of short-term debt. Plus, a New York Attorney General investigation found that it hasn't always had enough money on hand to support the coin.
Be prepared for a bumpy ride
Many analysts warn that the crypto market is due for a correction in 2022, which is unsurprising given the huge gains we've seen. Others believe that this is only the start and crypto still has huge potential. What's certain is that we'll see increased regulation, continued pandemic-related economic fallout, and ongoing volatility.
Make sure you do your own research and only invest money you can afford to lose. If crypto only makes up a small percentage of your portfolio, you can minimize the risk and ensure that if the market does collapse, it won't knock you off course financially.
