Cryptocurrency is digital money that isn’t managed by a central system, like a government. Instead, it’s based on blockchain technology, with Bitcoin being the most popular one. As digital money continues to gain traction on Wall Street, more and more options become available.

While you can use cryptocurrency to make purchases, most people treat it as a long-term investment. However, volatility makes investing in cryptocurrency risky, as demonstrated by last year’s freefall among cryptocurrencies, including stablecoins pegged to the U.S. dollar. It’s important to know what you’re getting into before you buy in.

Top 8 Cryptocurrency Investments in 2023

These are eight top cryptocurrencies that could prove to be worthy of investment in 2023.

1. Bitcoin (BTC)

Bitcoin has been around for the longest of any cryptocurrency. It’s easy to see why it’s the leader, with a price and market cap that are much higher than any other crypto investment options.

Many businesses already accept bitcoin as payment, which makes this cryptocurrency a smart investment. Visa, for example, transacts with bitcoin. And after a long cryptocurrency hiatus, Stripe, through its partnership with OpenNode, allows merchants to settle transactions and convert payments to bitcoin. The larger banks have begun to incorporate bitcoin transactions into their offerings, as well.

While Tesla accepted bitcoin only briefly, it might again if mining it becomes more environmentally friendly. In a step toward that end, Blockstream and Block, formerly known as Square, broke ground on a bitcoin mine in Texas last November. The mine will be fully powered by Tesla’s solar array and Megapack battery, CNBC reported in April 2022.

Several companies, including Fidelity and BlackRock, hope to create spot bitcoin ETFs, but so far the Securities and Exchange Commission has rejected their applications. However, the ticker for BlackRock’s spot bitcoin ETF briefly, and perhaps erroneously, appeared on the Depository Trust & Clearing Corp.’s website, leaving investors to speculate about whether approval might be imminent, CoinDesk reported.

Risks of Investing In Bitcoin

The value of bitcoin tends to fluctuate a lot. You may see the price go up or down thousands of dollars during any month. That certainly was true in 2022, as bitcoin prices correlated to the Nasdaq, as CNBC reported, challenging previous assumptions that bitcoin would serve as a hedge against inflation.

Bitcoin also reacted strongly to the collapse of the FTX cryptocurrency exchange. However, Commodity Futures Trading Commission Chairman Rostin Behnam called bitcoin the only cryptocurrency asset that can be considered a commodity in the wake of the FTX collapse, Cointelegraph reported. The coin is up 106% since the beginning of the year.

If wild fluctuations like these make you nervous, you may want to avoid bitcoin. Otherwise, as long as you keep in mind that cryptocurrency could be a smart long-term investment, these fluctuations shouldn’t be too concerning.

Another reason to reconsider investing in bitcoin is its price. With a single bitcoin costing over $30,000, most people can’t afford to buy whole bitcoins. For investors who want to avoid buying a fraction of a bitcoin, this is a negative.

2. Ethereum (ETH)

Ethereum is a network that allows developers to create their own cryptocurrency and deploy smart contracts utilizing the network. While ethereum is far behind bitcoin in value, it’s also far ahead of the other competitors.

Even though it came out years after some other cryptocurrencies, ethereum has far exceeded its place in the market because of its unique technology. It’s currently the most popular blockchain and the second-largest cryptocurrency behind bitcoin.

It stands to gain even more ground following the deployment of an upgrade, nicknamed “The Merge,” that shifted Ethereum to a proof-of-stake-based consensus. The upgrade has reduced the number of coins and rendered ethereum mining obsolete. The Merge has also drastically reduced Ethereum’s energy consumption.

Although ether doesn’t have the widespread acceptance bitcoin does, traditional companies are coming on board. Fidelity, for example, bulked up its tech workforce to create the infrastructure needed to offer ethereum custody and trading services to its customers, The Wall Street Journal reported.

Risks of Investing In Ethereum

Although The Merge vastly improved Ethereum’s energy efficiency, it didn’t resolve slow transaction speeds or high gas fees. The platform currently has just one “lane” for conducting transactions. This can lead to transactions taking longer to process when the network is overloaded.

Transaction fees are also high. For improvement there, users must wait for Ethereum to implement “danksharding,” which will require several upgrades. According to the Ethereum development site, proto-sharding, an intermediate step in that process, will use rollups to reduce costs. Rollups bundle hundreds of transactions into one transaction on layer one and could reduce fees by up to 100x.

Some have grown tired of waiting. The Dydx cryptocurrency derivatives exchange, for example, is moving to its own blockchain.

3. BNB (BNB)

Because of its performance over time, binance coin, now called BNB, has proven to be one of the more stable investment options — relatively speaking. It’s the native token on Binance, which is the world’s largest cryptocurrency exchange, and on Binance.US, the version U.S. residents must use. But despite its extensive functionality and the coin’s success in Binance sub-projects, BNB is still a highly volatile investment.

One thing working in BNB’s favor is that Binance burns, or destroys, coins once per quarter. The most recent burn, which BNB Chain reports occurred on Oct. 16, reduced the coin supply by 2.14 million tokens — about $480.39 million worth. It didn’t affect prices in the short term, but managing the number of tokens can have a positive effect over time by creating scarcity. BNB has a total supply of 151,704,606 — all of which are circulating.

It’s worth noting that Binance has taken a leading role in stabilizing the crypto industry following the collapse of the FTX exchange. It has devoted $1 billion to a recovery fund established to keep struggling players afloat, CNBC reported.

Risks of Investing In BNB

Although BNB’s position as the native cryptocurrency on the world’s largest exchange “legitimizes” it in some respects, it also makes the currency especially vulnerable to regulatory issues. BNB lost 7.3% of its value in June 2022 when news broke of a Securities and Exchange Commission investigation into whether Binance followed proper procedures in its 2017 initial coin offering, Fortune reported. The SEC has accused Binance of other wrongdoing, including commingling investor funds and using Binance.US as an unregistered exchange.

4. Cardano (ADA)

The Cardano network has a smaller footprint, which is appealing to investors for several reasons. It takes less energy to complete a transaction on Cardano than on a larger network like Bitcoin. This means transactions are faster and cheaper.

In 2021, Cardano launched a “hard fork,” an upgrade that increased functionality — in this case, enabling smart contract deployment. Another hard fork, this one called Vasil, launched in September 2022 and should improve the Cardano blockchain’s scalability, Mint reported.

Cardano recently launched a test version of a platform called AdaSwap, where developers can build decentralized finance apps. AdaSwap could elevate Cardano’s status as a Web3 network and drive up the price of its coin. While the coin is No. 8 in terms of market value, Cardano’s non-fungible-token protocol is the world’s second largest, according to U.Today.

Risks of Investing In Cardano

Even with a better network and the increased functionality smart contracts provide, cardano may not be able to compete with larger cryptocurrencies. Fewer adopters mean fewer developers. This isn’t appealing to most investors, who want to see a high adoption rate.

The platform has big plans, such as launching an incubator that would help Africa reach its potential as a major economy, but it remains to be seen whether it can live up to that potential.

Advice

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Don’t be discouraged by fluctuations in the market. Your investment may lose money one day and make a profit the next. Instead of getting caught up in the day-to-day changes, look at the big picture.

5. Polygon (MATIC)

Polygon was created by a development team that made significant contributions to the Ethereum blockchain platform. Polygon is designed for Ethereum scaling and infrastructure development, according to CoinMarketCap. As a “layer two” solution, it expands Ethereum into a multi-chain system, improving transaction and verification speed.

Polygon has backing from the Binance and Coinbase cryptocurrency exchanges. Its token, MATIC, is used for payment services, transaction fees and as a settlement currency.

In July 2022, Polygon announced in a press release that it had launched Polygon zkEVM, “the first Ethereum-equivalent scaling solution that works seamlessly with all existing smart contracts, developer tools and wallets.” It does this with a type of cryptography called zero-knowledge proofs, which lower transaction costs and increase throughput.

Polygon hosted over 53,000 decentralized applications as of October 2022, including some from companies like Meta and Stripe and, more recently, Credit Suisse and Deutsche Bank. In addition, Polygon fully supports the tether stablecoin, which could contribute to the network’s future growth. Another plus is its investment in carbon neutrality, which occasionally has prompted price rallies.

Risks of Investing In Polygon

Polygon’s layer-two solution is designed to overcome Ethereum’s speed issues. However, Ethereum’s Merge upgrade could eventually result in faster transaction speeds than Polygon provides, eliminating Polygon’s primary advantage.

6. Terra 2.0 (LUNA)

The Terra Classic blockchain used stablecoins — that is, coins pegged to fiat currencies such as the U.S. dollar, South Korean won and the International Monetary Fund’s Special Drawing Rights currencies — to power global payment systems, according to CoinMarketCap. Its native coin, now using the symbol LUNC, stabilized the prices of the blockchain’s stablecoins.

However, terra crashed and burned in early May 2022, spurred by stablecoin volatility and overall skittishness in cryptocurrency markets, halting the cryptocurrency’s strong year and driving some crypto platforms into bankruptcy.

After the crash, Terra rebranded the original network as Terra Classic (LUNC) and launched Terra 2.0 (LUNA), a new blockchain without an algorithmic stablecoin, in an effort to stabilize the Terra ecosystem and help investors who lost money recoup some of their investment. LUNC coins trade separately from the LUNA coins that come with Terra 2.0.

Risks of Investing In Terra 2.0

The launch of Terra 2.0 was a controversial move, and industry watchers are undecided over its long-term viability. That said, several new projects have already launched on the new network, and its native coin may be worth watching if you have a high tolerance for risk.

7. Avalanche (AVAX)

Avalanche is a relatively new “layer one” foundational blockchain that can execute smart contracts. It was founded as an Ethereum competitor by Ava Labs and computer scientists at Cornell University, one of whom, former professor Emin Gün Sirer, is a veteran in cryptographic research, according to CoinMarketCap.

Avalanche’s three individual blockchains can validate transactions independently. This makes Avalanche scalable and able to handle large volumes of transactions — up to 6,500 per second. As a result, it’s increasingly popular among Ethereum projects, U.S. News reported.

As for the coin itself, Bloomberg reported last spring that avalanche had beat out ether as Terra’s reserve currency for its own UST stablecoin. Luna Foundation Guard, the nonprofit organization that supports Terra, intended to acquire $100 million worth of avalanche as part of that initiative.

AVAX began trading in 2020, in a 24-hour initial coin offering. Its price has fluctuated from a low of $8.70 to a high of $22.71 over the past year. As of Oct. 25, the coin trades for $10.49.

Risks of Investing In Avalanche

Sirer introduced the cryptocurrency via a white paper in 2018. Its launch took place in 2020. With such a short history, avalanche doesn’t have a track record for comparison, making it a riskier investment for potential buyers.

8. Chainlink (LINK)

Chainlink uses a decentralized oracle network to facilitate secure interactions between blockchains and external data feeds, events and payment methods the developers hope will allow smart contracts to become the dominant form of digital payment, according to CoinMarketCap.

One thing working in Chainlink’s favor is a strategic partnership with Google, under which Google uses Chainlink’s protocol to connect users to its cloud services, Benzinga reported.

Chainlink is also the choice for the new inflation index from decentralized finance company Truflation, built to serve as an alternative to the consumer price index. Whereas the CPI measures inflation using survey data, Truflation’s index uses 10 million data points from over 40 different sources to measure inflation more dynamically, accurately, objectively and transparently.

Chainlink Labs’ advisors include former Google CEO Eric Schmidt, DocuSign founder Tom Gonser and former LinkedIn CEO Jeff Weiner.

Risks of Investing In Chainlink

Despite its proven utility and support from major players, chainlink has experienced the same kind of volatility as other cryptocurrencies.

Advice

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Don’t settle on any number of cryptocurrency investments without continuing to learn about the market. A new cryptocurrency network could easily climb the ranks and emerge as a leader above other platforms. As an investor, the smartest thing you can do is to stay abreast of market happenings.

Rating the Top Cryptocurrency Choices

Run a quick online search and you’ll find dozens of recommendations for how to invest in cryptocurrency. In choosing the top eight picks, the following factors were considered.

Longevity

How long has the cryptocurrency been around? New cryptocurrencies aren’t immediately ruled out, but having historical data for comparison helps you see how a company has performed up until now.

Track Record

If you see stability in prices, that’s a good sign. If you notice that the cryptocurrency is gaining traction and becoming more valuable with time, that’s even better.

Good To Know

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Past performance is not indicative of future performance. At any time things can change, and an investment may perform better or worse than it has in the past.

Technology

How does the platform compare to others in terms of usability and security? The first thing you want to look for is the speed at which transactions occur. The network should be able to handle transaction traffic with ease.

You also want to make sure your investment is secure. Most cryptocurrencies use blockchain technology, making all transactions transparent and easy to track. Blockchain technology doesn’t necessarily make it harder for hackers to steal your cryptocurrency. It does make it easier to track your investment so it can be recovered instead of being lost following fraud.

Adoption Rate

How many people are investing in the cryptocurrency you’re considering? When you see a high level of adoption, that means the cryptocurrency has better liquidity. Trading, selling or spending will be easier in the future.

Final Take

There’s no question about it: Cryptocurrencies are here to stay. The question becomes: Where is the best place to invest your money in the market?

As you decide which cryptocurrency is the best investment for you, here are some other things to keep in mind:

• The speed at which transactions are completed
• The fees associated with transacting
• The ability to use your cryptocurrency for regular purchases and bank transfers

If you’re strictly looking to invest without transacting within the network, remember that cryptocurrency isn’t a get-rich-quick scheme. Instead, you should consider it a long-term investment.

GOBankingRates’ Crypto Guides

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• What Is Cardano? (ADA)
• What Is Bitcoin Cash? (BCH)
• What Is Litecoin? (LTC)
• What Is Polkadot? (DOT)
• What Is Ripple? (XRP)
• What Is Stellar? (XLM)
• What Is Tether? (USDT)

Daria Uhlig contributed to the reporting for this article.

Data is accurate as of Oct. 25, 2023, and is subject to change.