In 2021, Shiba inu (CRYPTO: SHIB) has taken the investment world by storm, creating astonishing wealth within months. In fact, despite falling 60% from its peak, the token meme has consistently produced a 61,000,000% return since November 2020. At this rate, $ 1.75 invested last year would be worth more than one. million dollars today.
Not surprisingly, Shiba Inu is still very popular in the crypto community, and many investors are hoping for a repeat performance. Unfortunately, the chances of this happening are non-existent. The life-changing wealth created by this cryptocurrency can be attributed to one quality: popularity. A brilliant branding and aggressive social media campaigns fueled its rise. Other than that, there is nothing special about Shiba Inu.
Worse yet, the top 10 wallets currently hold 65% of all Shiba Inu. This concentration creates a significant risk. These whales will decide to sell at some point, and when that day arrives, the price of Shiba Inu will drop sharply. To that end, there are dozens of cryptocurrencies that I would prefer to buy. Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Litecoin (CRYPTO: LTC) are at the top of this list. Here’s why.
Retail investors were the first to embrace crypto, but institutional investors are increasingly curious about the industry. A recent study by Nickel Digital Asset Management suggests that 62% of institutional investors with no current exposure plan to invest in cryptocurrency within the next year.
On that note, a study by PricewaterhouseCoopers indicates that Bitcoin, Ethereum, and Litecoin are the three most popular digital assets among crypto hedge funds. A Fidelity study corroborates this information, claiming that these three coins are the digital assets most widely held by institutional investors. In the years to come, as these big money managers pour funds into the crypto market, the price of Bitcoin, Ethereum, and Litecoin is expected to rise.
Bitcoin was the first widely adopted cryptocurrency, and it’s still worth more than any of its peers. It currently has a market value of $ 896 billion, which is 40% of the entire crypto market. As a result, Bitcoin has become synonymous with cryptocurrency.
Adding fuel to the fire, fintechs like Pay Pal and To block enable consumers to buy, sell and hold cryptocurrency through their mobile apps, making it even more accessible. At the same time, institutional adoption has skyrocketed over the past year. As of November 2020, institutional investors held 3.6% of Bitcoin on a fully diluted basis, but that figure rose to 7.1%.
Why is this happening? Besides its popularity, Bitcoin is a finite asset. Its source code limits the supply to 21 million pieces. And basic economics suggest that when demand exceeds supply, the price of an asset increases. Going forward, as more institutional investors branch out into cryptocurrency, this catalyst is expected to drive up the price of Bitcoin.
The investment thesis for Litecoin is similar. It was actually created from the source code of Bitcoin, but with a few key changes. In particular, Litecoin is four times more abundant. While Bitcoin is capped at 21 million coins, this network is capped at 84 million litecoins. Unsurprisingly, it has gained a reputation for digital silver, just as Bitcoin has gained a reputation for digital gold.
As more institutional investors add crypto to their portfolios, the popularity of Litecoin is expected to translate into demand, driving up its price. In fact, with a current market value of $ 10.3 billion – just 1% of Bitcoin’s market value – I wouldn’t be surprised to see this cryptocurrency grow tenfold over the next decade.
Ethereum was the first programmable blockchain. Rather than functioning as a simple payment system, developers can create self-executing computer programs (smart contracts) on the platform. And this technology powers Decentralized Finance (DeFi) applications, products that make it possible to lend, borrow, earn interest, and more, all without involving a bank. And by removing unnecessary third parties, DeFi makes financial services more efficient.
Concrete example: you could earn 3.16% APY by lending USD coin – a stablecoin designed to follow the US dollar – at Aave protocol. That’s much better than the 0.06% annual interest paid by the average savings account these days. With this in mind, the rapid growth of the DeFi industry is easy to understand. DeFi’s investments have climbed more than 1,200% to $ 249 billion in the past year, a trend that bodes well for Ethereum. In fact, with $ 162 billion invested in products on its blockchain, Ethereum represents 62% of the entire DeFi market.
So why invest in Ethereum? Besides its popularity with retail and institutional investors, the adoption of DeFi is expected to be an important catalyst. DeFi products are more efficient than traditional financial services, but they are not free. Users pay transaction fees in the form of cryptocurrency. To use products on the Ethereum blockchain, users must purchase the Ether token. And as more and more consumers invest in DeFi products on the platform, the demand for Ether and Ethereum is expected to increase, pushing up token prices.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.