Tomorrow, we'll turn the page on what's been an extremely rough month for virtually all asset classes. The stock market has undergone its biggest correction since 2020, and cryptocurrencies have been punished even more. In a recent three-day stretch, the aggregate value of all digital currencies declined by $600 billion.
But for patient investors with a long time horizon, certain cryptocurrencies may offer excellent returns.
The world's hottest cryptocurrency isn't worth investing in
Despite being one of the most-popular cryptocurrencies on the planet, thanks in part to its historic gain of 46,000,000% last year, meme coin Shiba Inu (CRYPTO: SHIB) is not one of the digital currencies that I feel will reward investors over the long run.
While there are a handful of factors working in Shiba Inu's favor, such as the number of unique wallet holders surpassing 1.1 million, and the median hold period of SHIB tokens climbing to 68 days from a mere six days in a little over three months, there are multiple red flags which should keep long-term crypto investors as far away as possible.
For example, no matter how many new holders enter the picture, it hasn't changed the fact that Shiba Inu lacks a competitive edge or true differentiation. An in-house layer-2 blockchain upgrade known as Shibarium should help lower transaction fees for Shiba Inu, but it's unlikely to do enough to allow this payment coin to stand out in a space where multiple next-generation blockchain projects can offer so much more.
Shiba Inu isn't particularly useful outside of cryptocurrency exchanges, either. Even after hundreds of new merchants gave SHIB the green light as a form of payment since early October, the total number of global merchants accepting Shiba Inu coin is only a hair over 600. This compares to well over 500 million entrepreneurs worldwide.
History has also proven unkind to payment coins that have delivered life-altering gains in a very short time frame. Cryptocurrencies with five-and-six-digit percentage gains in the short term have almost always gone on to retrace well over 90% after hitting their respective peaks. An equally large reversion is likely on tap for Shiba Inu.
These cryptocurrencies are much smarter buys than Shiba Inu
Instead of putting your money to work in a payment coin that's been hyped incessantly on social media, the following two cryptocurrencies can be bought in a heartbeat over Shiba Inu in February.
It's no secret that I believe Avalanche (CRYPTO: AVAX) offers the most intrigue and long-term appeal of any cryptocurrency. That's because Avalanche offers multiple competitive advantages and true differentiation in a crowded space.
Avalanche is a smart contract-driven blockchain network that delivers incredible speed and rapid scaling potential, as well as offers users the ability to develop financial and nonfinancial decentralized applications (dApps).
According to developers, Avalanche is capable of a transactional finality of less than two seconds, and can support more than 4,500 transactions per second (TPS) on its blockchain. "Transactional finality" describes the time it takes for a transaction to be confirmed as true and settle on the blockchain. This compares to the "Big Two," Bitcoin and Ethereum, which take a respective 60 minutes and six minutes to complete transactions. What's more, Bitcoin and Ethereum can only handle up to 7 TPS and 14 TPS, based on Avalanche website's comparison.
Aside from being faster, cheaper, and more scalable the two most-popular smart contract-supported blockchain networks, Avalanche is also highly compatible. For instance, the Ethereum Virtual Machine (EVM) -- the highly popular software used to create dApps on the Ethereum blockchain -- is already operating on Avalanche's blockchain. Incorporating the EVM on its blockchain should serve as a lure to attract developers to its network.
With so many clear-cut advantages over Ethereum, and a path to real-world utility, unlike Shiba Inu, Avalanche is a cryptocurrency to buy in a heartbeat in February.
As I've previously pointed out, the transparency of Cardano's development team is possibly this project's greatest attribute. The developers have consistently laid out a stepping-stone blueprint of how they're going to build Cardano from the ground up to become a popular choice for dApp developers.
While some of the scheduled upgrades haven't gone into effect when initially intended, a number of key improvements have been made to the Cardano networks over the past 19 months. For instance, July 2020 saw the Shelley upgrade take effect. Shelley allowed network participants to run a larger number of nodes. Following this upgrade, we witnessed rapid scaling of Cardano's network and increased transactional activity. What had been a network handling 2,000 transactions a day was now a network regularly seeing north of 100,000 transactions on its blockchain daily in 2021.
Shelley was followed by the Goguen update in September 2021. Goguen is what introduced smart contracts to the Cardano blockchain. Smart contracts are the secret sauce that allow dApp developers to create financial and nonfinancial applications on blockchain.
But the most exciting development for Cardano might just be the Hydra upgrade. What makes Hydra so intriguing is the rapid scaling potential it offers. Once put into use, Hydra will funnel transactions off the main blockchain to staking pools, known as Hydra Nodes. In theory, up to 1,000 of these nodes could each handle 1,000 transactions. While there's no official timetable for Hydra, its TPS potential could blow every existing cryptocurrency and traditional payment-processing network, such as Visa, out of the water.
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