The crypto market has skyrocketed over 500% to $1.7 trillion in the past two years.
A handful of digital assets stand out from the 17,600 cryptocurrencies in circulation.
Bitcoin, Ethereum and Terra stand out as leaders now and in years to come.
These digital assets are poised to dominate the crypto market in the years ahead.
Cryptocurrency is undoubtedly controversial. There are smart people on both sides of the debate — some see it as a disruptive force that could improve the financial industry, while others see it as a bubble that will end in catastrophe. But no one can debate the value that crypto has created. Over the last two years, the market has grown more than 500% to almost $1.7 trillion — and that’s after $1 trillion was wiped away in the most recent crash.
It’s certainly plausible that the crypto market will grow several-fold in the years ahead. After all, the global equity market is worth $120 trillion, according to nonprofit trade group Sifma. That’s more than 60-fold larger than the collective value of all cryptocurrencies. Unfortunately, with over 17,600 cryptos in circulation, investors have to so lot of research to sort things out.
If you’re looking for a place to start, consider these three coins. I think each will rank among the three most valuable cryptos by 2030. Here’s why.
Bitcoin (BTC 0.19%) was the spark that started the cryptoeconomy. In 2008, the pseudonymous Satoshi Nakamoto published a now-famous white paper. It detailed how a peer-to-peer electronic cash system could be built on a blockchain, a distributed system of records secured by cryptography. Doing so would allow consumers to transact directly with merchants, eliminating the fees charged by banks and credit card networks.
Of course, Bitcoin has not replaced traditional financial institutions, but it has still become a popular asset. Thirteen years after its launch, Bitcoin remains the most valuable cryptocurrency by a wide margin. In fact, its market cap of $720 billion accounts for nearly 42% of the entire crypto market. And Bitcoin is valued more highly than publicly traded companies like Visa and Mastercard.
A few factors have fueled that success. First, Bitcoin has become more secure over time, as evidenced by its rising hash rate, a measure of the computing power miners use to verify transactions. Second, Bitcoin is limited to 21 million coins, and any economics student can tell you that the price of an asset will rise when demand outpaces supply. And third, demand is rising.
More than 40 million accounts currently hold Bitcoin, and that figured has grown at an annualized rate of 21% over the last three years. Perhaps more importantly, Bitcoin is the most popular digital asset among institutional investors, a group with over $100 trillion in assets under management. Today, a small fraction of those funds have been allocated to cryptocurrency, but a survey from Fidelity suggests that institutional investors are increasingly interested in digital assets. And as adoption rises, Bitcoin’s price should follow.
Ethereum (ETH 0.03%) has long ranked as the second-most-valuable cryptocurrency. Its core innovation is a programmable blockchain, meaning it serves as both a system of record for financial transactions and a computing platform that can run self-executing programs known as smart contracts. That technology has evolved into a diverse array of decentralized applications (dApps) and decentralized finance (DeFi) services, and Ethereum leads both categories by a wide margin.
In fact, there are over 2,900 dApps on the platform, ranging from metaverse video games like Axie Infinity to NFT marketplaces like OpenSea, and those software products have drawn over 132,000 active users in the last 24 hours. In addition, investors have $118 billion locked in Ethereum DeFi products, representing 59% of all DeFi investments across any blockchain.
Unfortunately, Ethereum’s popularity has exposed scalability issues that have caused transaction fees to rise over the past few years, but the developer community has an upgrade in the works that could boost throughput from 14 transactions per second (TPS) to 100,000 TPS. That scalability solution is expected to go live in 2023, and it could supercharge Ethereum’s growth trajectory by bringing more developers, consumers, and investors to the platform. In turn, that popularity would drive demand for the ETH coin, pushing its price higher.
Terra (LUNC 1.06%) is a programmable blockchain designed to disrupt modern financial institutions. It features two cryptocurrencies: Terra and Luna. The former is a stablecoin that can be tied to the price of fiat currencies — for example, TerraUSD is pegged to the U.S. dollar — and the latter is used to absorb volatility and keep stablecoin prices at the desired level. Specifically, when rising demand pushes the price of TerraUSD above $1, the network incentivizes investors to convert Luna to TerraUSD, thereby increasing the supply and lowering the price. The system works the same in reverse.
Of particular note, the Terra blockchain is highly scalable — it can handle 10,000 TPS, with a finalization time of two seconds — which has kept transaction fees low. And that value proposition resonates with investors. In fact, Terra is the second-most-popular DeFi ecosystem, with $15.5 billion invested on the blockchain. But some of those DeFi products could be much bigger, as they aim to disrupt banks and payment networks.
For instance, the Anchor protocol pays interest to investors that lend stablecoins. Currently, you can earn a 19.5% annual percentage yield (APY) by lending TerraUSD on Anchor, much more than the 0.06% you might expect from the average bank savings account. Similarly, PaywithTerra is a payments platform that allows consumers to transact directly with merchants using Terra stablecoins. And because it’s powered by blockchain technology, it’s faster and cheaper than traditional solutions. In fact, merchants pay just $0.05 per transaction.
Collectively, Anchor and PaywithTerra create demand for Terra stablecoins, which translates into demand for Luna. As those products (and others) continue to gain traction with consumers, Luna’s price should rise. That’s why this digital asset could join Bitcoin and Ethereum as one of the top three cryptocurrencies by 2030.