Bitcoin and Ethereum rightfully get the most investor attention, having posted returns of 1,241% and 1,939%, respectively, since 2020. However, as the cryptocurrency and blockchain industry develops due to increased institutional and retail investment as well as technological developments, it begs the question if there is value in other sectors of the crypto market.
The value of cryptocurrencies is correlated to their use cases. Bitcoin is unique in that its primary use case is an inflation hedge and a store of value. Ethereum primarily operates in the decentralized finance (DeFi) and smart contract space. DeFi is traditional finance activity operating on a decentralized blockchain and smart contracts are self-executing contracts with terms written into code, meaning they can operate without the need of an intermediary. As the DeFi and smart contract industry has increased in value from $3.3bn in 2020 to $99.4bn today, the number of competitors in the space has also increased.
Solana is the leading alternative to Ethereum. It was developed in 2020 and quickly gained popularity for its ability to transact faster than Ethereum with lower fees. Since inception, Solana has returned circa 90,000%. Solana has seen an increasing number of users and strong ecosystem growth with a growing number of decentralized applications (dApps) built on it. Though recently, it has come under pressure due to a number of ‘memecoins’ developed on it by figures such as Donald Trump and Javier Milei which has soured investors sentiment, leading to a 35% decrease in price in the last month.
Ripple (XRP) is another cryptocurrency, with the primary use case of providing scalable and efficient cross-border payments. It aims to act as an alternative to the SWIFT system. XRP has gathered attention due to its settlement speed and low transaction fees, often a fraction of a cent. Since 2020, XRP has returned circa 1,300%.
As interest in alternative cryptocurrencies has increased, the ability to access them has become easier. Potential investors can buy the tokens directly from crypto exchanges or invest in ETP’s created by institutional investors.
In conclusion as competition increases in the DeFi and smart contracts space, increased competition has led to further innovation and in turn, increased investment opportunities. As blockchain technology continues to develop and merge with traditional finance, we believe that there may be increased scope for investment in crypto beyond Bitcoin and Ethereum, which in turn could provide outsized returns and diversification benefits.
DISCLOSURES
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Purchasing cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to this information’s accuracy, completeness, or reliability. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth nor the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.
This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
