What Are Altcoins & Top 5 to Invest in 2022

what are altcoins
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Altcoins have become increasingly popular as fiat currency alternatives, sparking interest from blockchain enthusiasts and self-made billionaires alike. But what are altcoins exactly?

"Altcoin" is a portmanteau of "alternative" and "coin," which includes every cryptocurrency aside from Bitcoin. Examples include Ethereum, Tether, Dogecoin, and USD Coin. Experts classify altcoins based on their uses. They also differ in their blockchains' method(s) for validating transactions.

In this article, I'll share the top 5 altcoins and why you should consider investing in them.

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Top 5 Altcoins to Invest in 2022

To date, over 1500 altcoins are listed on Coinmarketcap, which can prove overwhelming for potential investors wanting to enter the ecosystem. So which are the best to invest in?

In my opinion, below are the top five altcoins to invest in based on growth potential, blockchain security, market capitalization, trust, expert opinion, and past news reports/updates.

1. Ethereum (ETH)

Ethereum is undeniably one of the best altcoins to invest in. They're among the most widely used cryptocurrencies in the United States.

New Ethers are given as incentives to "miners" that help to secure its blockchain. They achieve this by validating transactions that successfully create new blocks.

This whole process, called proof-of-work, is important to understand as a potential investor since it determines how your future Ether dealings will remain secure.

In most cases, your Ethers should be safe if you don't divulge your wallet's password.  Since its launch in 2015, Ethereum has boasted impressive growth in value versus fiat currencies.

This is a major benefit since no one wants to invest in any altcoin that'll lose worth over time.  It's come a long way since its release, with one unit valued under $1 throughout 2015.

By the time 2016 ended, ETH hit around $8, skyrocketing to $826 in the subsequent year.  To date, ETH is worth about $1,700 with a market cap of $212 billion.

Its highest value was about $4,800 in November 2021 — which just goes to show how volatile ETH is.  It's also an indication, I think, of ETH's potential for future growth (and I'm sure experts will agree with me).

After all, its blockchain has several vital applications such as facilitating smart contracts, enabling decentralized finance, and selling NFTs. 

Besides, ETH is trusted by top companies like those that formed the Enterprise Ethereum Alliance (EEA) in 2017.

With the continuous development of Ethereum, which is about to culminate in an "Ethereum 2.0" upgrade, Ether's position in the crypto world isn't going to be challenged any time soon.

2. Tether (USDT)

To reduce altcoin's price volatility, Tether's market value was tied to that of the US dollar, meaning one Tether is equal to one US dollar. Pretty straightforward, right? 

These altcoins, called stablecoins, are an excellent investment to maintain your asset's value.  I think Tether's white paper, "Tether: Fiat currencies on the Bitcoin blockchain, put it best: "Tether is based on the Bitcoin blockchain, the most secure and well­-tested blockchain and public ledger in existence.

Tethers are fully reserved in a one-­to-­one ratio, completely independent of market forces, pricing, or liquidity constraints."

Put simply, Tether is just as safe as bitcoins since they're in a similar blockchain. Like with Ethereum, Tether miners also secure all transactions through the proof-of-work mechanism.

Because its value is directly linked to that of a fiat currency, it's relatively stable compared to other altcoins.  For example, after the news of a potential Russian ban on cryptocurrencies, the values of Bitcoin, Ethereum, SOL, and others dropped dramatically, causing investors in those altcoins to lose millions (or even billions) of dollars.

Meanwhile, USDT's trading volume doubled the day after Tether's owners launched their new intuitive website.  Let me tell you about a couple of major events that I believe amply demonstrate why USDT is one of the best altcoins (or even the best cryptocurrencies, period) to invest in. 

At the start of the crypto crash in 2021, USDT's market cap plunged from $83 billion to $73.2 billion. It continued this downward trend in the next year, hitting $71.52bn in June 2022.

However, according to Paolo Arduino, Tether's chief technology officer, the company kept its one-to-one ratio promise while issuing withdrawals. (How they're able to do that, I'm not sure, but as a potential investor, I'm certainly not complaining.)

Conversely, when Russian banks more than doubled their interest rates from 9.5% to 20% in early 2022, the commensurate increase in the value of the US dollar positively affected Tether.

In other words, as long as the US dollar has a decent value, USDT (and similar cryptocurrencies that I'll discuss in a bit) will hold value as well.

Since the US dollar is arguably one of the most stable (if not the most stable) currency in the world, I think USDT will be here to stay. 

3. USD Coin (USDC)

USD Coin is another stablecoin that was launched in September 2018. As you might've guessed from its name, this is also tied to the US dollar, meaning one USDC equals one US dollar.

Also, each USDC is an ERC-20 token inside the Ethereum blockchain.  The most notable thing about USDC, however, is that its transactions are attested by Grant Thornton, LLP, a leading accounting services firm.

That means the public can easily access the monthly attestations on the founding consortium's website.  Here's how tokenizing your US Dollar into USDC works:

  1. You send the US dollars to the bank account provided by the coin issuer. Most issuers are private crypto exchanges, such as Coinbase, Binance, Bitfinex, Poloniex, and Uniswap.
  2. Using smart contracts, the issuer mints an equal amount of USDC.
  3. The USD Coins are then sent to your Ethereum wallet, while the US dollars you sent move to a reserve.

The beauty is that you can do it the other way around too. If you want to redeem your dollar from USDC, all you have to do is follow the above steps in reverse.

Like with most altcoins, USDC transactions are relatively quick and effortless.  However, unlike most altcoins, the process and reserve are strictly regulated by USDC's founding members — Coinbase cryptocurrency exchange and Circle, a peer-to-peer payment technology company.

Still, USDC did manage to hit a $54.2 billion market cap at one point, which is impressive for a relatively new altcoin. I believe the fact that it's tied to a strong currency, plus the relative ease at which people can use it, makes USDC one of the best altcoins to invest in.

4. Cardano (ADA)

Launched in 2017 by Charles Hoskinson, Ethereum's co-founder, ADA is another altcoin worth considering as far as investments are concerned. Essentially, ADA is a payment token that runs on its blockchain called Cardano.

Cardano was funded through an Initial Coin Offering (ICO), helping ADA quickly launch in the crypto market with a $600 million market cap.

Three months later, the value multiplied more than 15 times, hitting $10 billion. It even briefly hit $33 billion in 2018 — an astounding achievement for a crypto its age at the time. 

Cardano uses a different mechanism to secure peer-to-peer transactions — namely, the proof-of-stake (PoS). Although miners are also involved in this security system, they commit a certain quantity of un-spendable blockchain tokens (ADA in this case) for a period before joining the process.

That means Cardano is more likely to deter unscrupulous folks from participating in mining, as they don't have the incentive to damage a blockchain they're stakeholders of.

Moreover, PoS is much more energy-efficient, as shown by the fact that Ethereum plans to use it in the latter's transition to 2.0.

Because its blockchain is relatively more secure, I think ADA has the potential to rise as much as (and potentially overtake) Ethereum in terms of value in the years to come.

At the same time, since it's relatively new, ADA still has a lot of room for improvement.  ADA hit an all-time high of $3.10 in 2021, with experts suggesting that its value can go up even further.

ADA is currently the biggest proof-of-stake altcoin by market cap, but this may change if ETH 2.0's successfully launches.  I should note that, like Ether, ADA can be highly volatile since it isn't a stablecoin.

As promising as this altcoin is in terms of potential growth, I strongly advise against investing more than you can afford to lose in it.

5. Solana (SOL)

Since Anatoly Yakovenko started it, SOL has become one of the most promising altcoins in terms of growth potential.  SOL is built on the Solana blockchain that secures its transactions via the proof-of-stake system.

However, it also comes with a validation process called the proof-of-history, which further ensures that your transactions will be kept safe.

I could go on about the technicalities of proof-of-history, but essentially, it bolsters the blockchain by tracking blocks' time. You can learn more about it here via Solana's official website.

Moreover, many crypto enthusiasts and institutions have embraced this blockchain for its speed. Its hybrid protocol ensures lightning-fast transaction and smart contract validation times.

Many experts have compared it to Ethereum because of their blockchains' similar applications. With its lower fees and faster transaction times, Joanna Ossinger of Bloomberg called Solana "Ethereum's potential long-term rival."

SOL has helped to decentralize finance and host Non-Fungible Tokens (NFTs). Even the US's former first lady, Melania Trump, announced her plans to use the blockchain to launch NFTs.

Considering these various applications and advantages, SOL will likely stay relevant for a long time. So, it should be one of the top altcoins in your consideration for investment.

Since it's not a stablecoin, however, you should exercise the utmost caution when investing in SOL. Otherwise, it'll crash in value before you even realize what on earth is going on.

Why You Should Invest in Altcoins

The criticisms against altcoins aside, I think they're here to stay. There are several good reasons to invest in altcoins such as:

Growth potential

Let's face it: When you're investing, you want to get returns that are as high as possible and as quickly as possible. Considering the huge growth potential of altcoins, I think they perfectly fit these criteria. 

For example, Ether's price in 2021 grew by 280% between January to September 2021. ADA's was 1,033% from $0.18 to $2.04, and SOL's price growth from $1.51 to $132.34 was a staggering 8,664% rise.

Granted, their values were relatively volatile even within the above periods. But if you'd timed your investments right, you likely could've seen massive returns. 

So if you're into high-risk, high-reward investments, altcoins are for you.

Access their blockchain applications

Altcoins have become more than just payment tokens. Since their blockchain runs other processes like enabling smart contracts for NFT projects and decentralized finance, investing in their tokens (altcoins) has become essential to access such benefits.

For example, you need to use some Ether to purchase any desirable Ethereum-based NFTs. You can't directly exchange tether, USDC, or ADA for it.

This can seem like a downside from a certain point of view, but I think it's proof of altcoin's improved security and potential value. 

Earn staking rewards

As I've said earlier, some altcoins' blockchains like ADA's maintain security through their proof-of-stake system.  If you have some ADA and stake it, it contributes to the blockchain's mining process as you earn rewards in return.

Think of it as dividends stockholders receive.  For example, in Cardano, you'll earn a 5% reward on staking ADA. Since the reward is a percentage rather than an absolute amount, you have an incentive to invest even more.

Summary

An altcoin is any cryptocurrency that isn't Bitcoin. The word comes from a combination of "alternative" and "coin," and it includes ETH, BNB, XRP, USD Coin, and Dogecoin.

In my opinion, the top five altcoins to invest in are Ethereum, Tether, USD Coin, ADA, and SOL. To date, they are some of the most popular and largest by market capitalization.

You should invest in altcoins because of their growth potential, staking rewards, and accessing some of their blockchain's functionalities.

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