In the world of investing, trends can be powerful allies—until they shift unexpectedly. This dynamic was clearly at play in the cryptocurrency markets over the past year and continues to shape the outlook for digital assets in 2022.
The previous year was remarkable for cryptocurrencies, reinforcing the case for including them in portfolios designed for risk-tolerant investors. The total market capitalization of digital currencies surged from just over $800 billion at the beginning of 2021 to approximately $2.25 trillion by year-end—an impressive expansion for an asset class that emerged just over a decade ago.
Despite these gains, the crypto market did not carry strong momentum into the new year. Most major cryptocurrencies experienced stalled growth toward the end of 2021, showing sensitivity to market cycles and shifting sentiment, particularly as inflation became a more prominent economic theme.
To better understand which digital assets may regain momentum, we consulted industry experts to identify promising cryptocurrencies for 2022 based on their underlying business cases and fundamental strengths.
How Cryptocurrencies Performed in 2021
While Bitcoin delivered strong returns in 2020, 2021 was undoubtedly the year of alternative cryptocurrencies, or "altcoins."
Bitcoin began 2021 at approximately $29,000 and ended around $46,000, representing a gain of roughly 60%. However, this journey was far from linear. The cryptocurrency reached an April high above $63,000, plunged below $30,000 in July, and approached $69,000 in November before moderating toward year-end.
More significantly, Bitcoin's dominance within the cryptocurrency market declined substantially throughout the year. While Bitcoin accounted for 70% of the total crypto market capitalization in January 2021, this share had decreased by 40% by December, indicating substantially stronger performance among alternative digital assets.
Ethereum, the second-largest cryptocurrency by market capitalization, demonstrated particularly impressive growth. Starting the year below $740, it reached above $3,710 by year-end—a five-fold increase—after having touched nearly $4,900 in November.
Other cryptocurrencies delivered even more dramatic returns. Binance Coin, the third-largest crypto asset, surged approximately 1,280% from under $40 to nearly $530. Solana achieved an astonishing 9,600% gain, finishing the year with a market capitalization just over $55 million.
These extraordinary returns have created elevated expectations among cryptocurrency investors—expectations that may be challenging for established coins to meet, though many professionals still prefer larger, more established cryptocurrencies.
With this context established, let's examine expert perspectives on the most promising cryptocurrencies for 2022.
Cryptocurrencies with Fast Transaction Speeds and Low Costs
Kevin O'Leary, strategic investor at Immutable Holdings and panelist on CNBC's Shark Tank, evaluates cryptocurrencies through the lens of a software investor. Rather than simply comparing features, he examines the development teams and underlying technology behind each blockchain project.
O'Leary maintains strong conviction about three specific cryptocurrencies: Solana, Polygon, and HBAR. He believes these projects are positioned for steady growth and development throughout 2022 based on their technological foundations and development progress.
Solana
Launched in April 2019, Solana focuses on leveraging blockchain's permissionless nature to provide decentralized finance (DeFi) solutions. These include payment processing, smart contracts, stablecoins, and peer-to-peer lending services. The platform facilitates decentralized application (DApp) creation using a hybrid validation method that combines proof-of-history (PoH) with proof-of-stake (PoS) consensus mechanisms.
Polygon
This platform addresses several limitations of the Ethereum blockchain while maintaining compatibility with Ethereum-based DeFi solutions. Polygon aims to create "Ethereum's internet of blockchains" by connecting Ethereum-compatible networks and aggregating scalable solutions on the Ethereum ecosystem.
HBAR
Hedera Hashgraph (HBAR) is an enterprise-grade public network that powers decentralized economic applications. The platform's governance includes representatives from leading global organizations including Alphabet, Deutsche Telekom, LG, and TATA Communications. HBAR provides a blockchain foundation for developers to create secure applications tailored to enterprise requirements.
O'Leary emphasizes that transaction speed represents a critical differentiator for cryptocurrencies, particularly for financial applications. Both Solana and Polygon excel in this regard within forex market contexts. He believes utility—not just performance—should be a primary consideration when evaluating cryptocurrency investments.
These three cryptocurrencies represent strong contenders for 2022, though O'Leary anticipates broader crypto market growth throughout the year. He does acknowledge regulatory challenges, particularly in jurisdictions that have implemented cryptocurrency restrictions. However, he views clearer regulation—particularly in the United States—as essential for long-term market development rather than as a limitation.
The Role of NFTs and Emerging Digital Assets
Non-fungible tokens (NFTs) represent another significant development in the cryptocurrency space. These unique digital assets exist primarily on the Ethereum blockchain, though other platforms have begun supporting similar functionality. NFTs can represent various digital items including artwork, music, memes, and collectibles, with much of the current interest focused on digital art applications.
The NFT market has expanded dramatically, growing to over $20 billion globally in 2021. This growth reflects increasing interest in digital ownership and collectibles, with NFTs functioning similarly to physical art collections—while reproductions may be widely available, only one owner holds the original authentic token.
Jordan Fried, CEO and founder of Immutable Holdings, believes 2022 will be characterized by innovation in decentralized autonomous organizations (DAOs), social tokens, and NFTs.
DAOs represent online communities that collectively control cryptocurrency wallets, typically using Ethereum-based tokens. These organizations pursue specific missions such as business operations or investment activities, with rules encoded as computer programs that govern member interactions and record transactions on a blockchain.
Individuals can purchase DAO tokens to gain membership in these communities. While these tokens have market prices and capitalizations similar to other cryptocurrencies, they typically function differently as spending mechanisms.
Fried believes DAO-based projects will thrive in 2022 because they fundamentally transform organizational structures, allowing participants to have genuine stakes in decision-making processes. He also anticipates growth in "social tokens" issued through DAOs, which enable artists, brands, and other entities to monetize their communities directly.
Bitcoin as Digital Gold
Perspectives on cryptocurrency value propositions range from skeptical to enthusiastically optimistic. One prominent thesis positions Bitcoin as "digital gold"—a potential hedge against inflation in the global economy.
Wealth services firm Wilmington Trust describes Bitcoin's role as similar to digital gold, though not identical since it lacks physical asset backing. Instead, the firm suggests Bitcoin may function as a currency hedge against potential decline in the U.S. dollar's status as the world's reserve currency.
The firm notes Bitcoin's 237% annualized return since 2010, though this comes with substantial volatility—standard deviation four to six times that of stocks, and three significant drawdowns between 53% and 83% in just the past four years.
These characteristics make Bitcoin suitable for small portfolio allocations, particularly for investors seeking alternative investment opportunities that potentially offer both high returns and inflation hedging properties.
Wilmington Trust suggests cryptocurrencies could potentially supplant traditional gold as stores of value, noting comparative returns in recent years support this possibility. This perspective finds support in broader market surveys, including JPMorgan research indicating 67% of millennials view Bitcoin as the new gold and prefer it to traditional gold for weathering financial market volatility.
Identifying Promising Cryptocurrencies for 2022
Any forecast inherently contains uncertainty, but expert insights highlight growing areas within the cryptocurrency ecosystem that may not yet be widely recognized. The question remains whether these emerging cryptocurrencies will prosper and further reduce Bitcoin's market dominance.
If current trends continue, established names like Bitcoin and Ethereum may experience relative stability while smaller cryptocurrencies capture additional market share. The crypto space has already witnessed an influx of alternative coins offering functionality beyond what digital "blue chips" provide, with many created specifically to address limitations in major cryptocurrencies.
However, the cryptocurrency market isn't zero-sum. Smaller altcoins can prosper without requiring declines in Bitcoin or Ethereum. The sheer size of established cryptocurrencies naturally limits their potential for outsized returns—the Law of Large Numbers constrains such growth—creating greater opportunity for smaller, emerging projects targeting specific applications.
Despite this, blue-chip cryptocurrencies like Bitcoin and Ethereum may represent the best option for investors seeking relatively safer long-term cryptocurrency investments, given their market positions and established application networks. Bitcoin particularly maintains its position as the dominant store of value within the crypto universe based on market capitalization and recognition.
Bitcoin also leads in real-world use cases, offering the most physical locations for usage through Bitcoin ATMs and the broadest acceptance for online payments. Major payment processors including PayPal enable Bitcoin transactions, and numerous Fortune 500 companies accept it as payment.
Bitcoin's pioneering role has established foundation for subsequent cryptocurrencies. While newer coins serve specific roles, the entire asset class appears positioned for continued development throughout 2022 and beyond.
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Frequently Asked Questions
What factors make a cryptocurrency promising for investment?
Promising cryptocurrencies typically combine technological innovation, real-world utility, strong development teams, and growing adoption. Transaction speed, cost efficiency, and specific use cases beyond mere speculation are particularly important indicators. Investors should also consider regulatory compliance and market position when evaluating digital assets.
How much portfolio allocation should consider cryptocurrency?
Most financial advisors recommend limiting cryptocurrency exposure to 1-5% of total investment portfolios, depending on individual risk tolerance. Cryptocurrencies remain highly volatile compared to traditional assets, so appropriate position sizing is crucial for risk management.
What is the difference between Bitcoin and altcoins?
Bitcoin was the first cryptocurrency and remains the largest by market capitalization. Altcoins (alternative coins) refer to all other cryptocurrencies that followed Bitcoin. These often offer different features, functionalities, or improvements over Bitcoin's original design, though they generally carry higher risk and volatility.
How do transaction speeds vary between cryptocurrencies?
Transaction speeds vary significantly between different blockchain networks. Bitcoin processes approximately 7 transactions per second, while Ethereum handles around 30. Newer networks like Solana claim capacity for 65,000 transactions per second. These differences impact practicality for various applications, particularly payment processing.
What role will regulation play in cryptocurrency markets?
Regulation will likely significantly impact cryptocurrency markets throughout 2022 and beyond. Clearer regulatory frameworks could increase institutional adoption while potentially limiting some decentralized applications. Most experts believe thoughtful regulation ultimately benefits the ecosystem by reducing fraud and increasing investor confidence.
Are cryptocurrencies effective inflation hedges?
The effectiveness of cryptocurrencies as inflation hedges remains debated. While some investors view Bitcoin as "digital gold" that preserves value during currency debasement, its high volatility sometimes correlates with risk-off market environments. The inflation-hedging properties likely vary across different cryptocurrencies based on their specific characteristics.