Hindsight is a wonderful thing. With the benefit of hindsight, I'd have bought Bitcoin (BTC) back in 2009 and now be sipping mojitos on a Caribbean island. But unfortunately, we can't invest with hindsight, and having too many mojitos is bad for your health.
It is interesting to look at how certain tokens have performed in the past year, not least because it reminds us of the extraordinary growth the whole industry has seen. It can help us spot useful trends for the future, and identify market segments worth following.
Here are four coins I'd have bought -- or bought more of -- on October 1, 2020 with the benefit of hindsight. If you'd bought $1,000 of each, you'd own over $250,000 worth of cryptocurrency today. Not only have they seen significant gains, but they also have strong long-term potential.
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The super-fast smart contract cryptocurrency has astonished commentators in recent months, hitting all-time high after all-time high. Smart contracts are tiny pieces of self-executing code that take blockchains to a whole other level. Rather than simply recording transactions, smart contracts live on the blockchain and act automatically when certain conditions are met.
Ethereum (ETH) was the first smart contract platform, but is struggling with high transaction costs and network congestion. It is working on an upgrade to Eth2, but until then, there's fierce competition among Ethereum alternatives like Solana to take market share.
Solana has gained over 4,800% since this time last year. Or, to put it another way, if you'd bought $1,000 worth of SOL a year ago, it would be worth almost $50,000 today.
Terra has gained over 12,000% in the past year, catapulting it into the top 50 cryptocurrencies by market cap. Terra is one of the leaders in what are called algorithmic stablecoins. Stablecoins avoid the volatility we see in normal cryptocurrencies, because their value is pegged to another commodity -- like gold or the U.S. dollar.
Some, like USD Coin (USDC), are fiat-backed stablecoins. This means that for every USDC issued, there should be $1 in reserve to support the token. Terra's coins -- including Terra U.S. Dollar (UST), Euro (EUT), and Canadian Dollar (CAT) -- work differently. They are supported by a pool of LUNA tokens which an algorithm-driven smart contract buys or sells to keep prices in line.
While I'm concerned about the potential impact of regulation on the stablecoin market, Terra's dramatic growth makes it a coin I wish I had in my portfolio right now.
Like Solana, Fantom is a smart contract crypto platform. What sets it apart is that it uses something called a directed acyclic graph (DAG), which allows for processing transactions in parallel and makes the system more scalable.
It's also seen huge returns -- FTM has risen over 3,000% in the last year. On Oct. 1, 2020, 1 FTM was worth $0.0386, and it's now trading at $1.21.
If I had a time machine, I'd go back and buy all the cryptos with smart contracts I could find, even though there's a good chance that only four or five will eventually come out ahead. But smart contracts are simply one of the most exciting parts of blockchain technology. They power the booming decentralized finance (DeFi) industry and the popular world of digital collectibles in the form of non-fungible tokens (NFTs).
Broadly speaking, there are two ways cryptos solve the problems facing older cryptocurrencies like Bitcoin or Ethereum. Either they start from scratch and build a new, improved, blockchain, or they create what's called a "layer 2" solution, which sits on top of the existing blockchain and processes transactions faster and cheaper.
Polygon is a popular layer 2 solution. It's unusual because it doesn't offer just one option -- it is a scalability solution aggregator. Developers can choose the route that works best for them. Its price has increased over 5,500% since last year.
Looking to the future
I don't have a crystal ball, so I can't tell you which cryptos -- if any -- might produce similar returns in the future. The coins above are all available from top cryptocurrency apps and exchanges, but bear in mind that these massive gains are no guarantee of future performance.
The cryptocurrency market is notoriously volatile and unpredictable, which is why it's advisable to only invest money you can afford to lose. But one trend that may be worth watching in the year to come is adoption.
Ethereum may be slow and expensive, but it still hosts the lion's share of applications because people are used to using it. With so many coins jostling for position and so many different technological solutions, the next stage will be to see which ones can attract significant numbers of users. So, if you're looking for a way to differentiate one project from another, you might consider the number of projects running on each platform, and the number of developers using it.
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4 Cryptos I Wish I'd Bought Last Year - Motley Fool
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