All eyes have been on Bitcoin, but it’s time for these cryptocurrencies to shine.
Bitcoin (BTC 0.58%) has dominated headlines for much of the last few months due to the arrival of spot exchange-traded funds (ETFs) along with its most recent halving, which occurred on April 19. But with those developments in the rearview mirror, other cryptocurrencies might have fallen off investors’ radar.
For those looking to take advantage of the best that this crypto bull market has to offer, it’s worth considering these three digital currencies to give their portfolio a boost.
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1. Ethereum
It would be safe to say that no cryptocurrency portfolio is complete without Ethereum (ETH 0.40%). While Bitcoin provides investors with exposure to the most proven, secure, and decentralized cryptocurrency, it doesn’t provide exposure to one of the most prominent and innovative uses for cryptocurrencies today: decentralized finance (DeFi).
There are other blockchains with DeFi capabilities, but Ethereum completely dominates the space. As of today, nearly 60% of the total value tied to the DeFi economy calls Ethereum home. The next closest competitor is Tron with just 8%.
Composed of lending protocols, stablecoins, non-fungible tokens, and much more, DeFi is brimming with potential. By investing in Ethereum, you can ensure your portfolio will benefit from the continued growth of this burgeoning digital economy.
And an Ethereum ETF could be the next in line to get the green light from the Securities and Exchange Commission (SEC). Bitcoin was the first to get an ETF approved in January, and now it seems that Wall Street wants more exposure to the crypto landscape and has its sights set on Ethereum.
If such an ETF gets approved, it could open up the cryptocurrency to new sources of demand as buyers who were either dissuaded from buying either because they were anxious about direct ownership of cryptocurrencies or they faced restrictions from such direct ownership would be able to add the champion of DeFi to 401(k)s, IRAs, and many other similar accounts.
2. Stacks
Bitcoin doesn’t provide exposure to DeFi because it doesn’t possess smart-contract functionality that allows for the creation of innovative applications commonly found in DeFi. While some view this as a pitfall, there is one blockchain that is leveraging Bitcoin’s unique characteristics (security, decentralization, and the like) and combining it with its own smart contracts: Stacks (STX 1.35%).
Known as a Layer 2, Stacks allows developers to build smart contracts and applications that then finalize transactions on Bitcoin, ultimately inheriting the latter’s high degree of security and decentralization. Even better, Stacks is unveiling new functionality that will make it even easier for Bitcoin holders to participate in the DeFi economy by giving its trillion-dollar market access to new uses beyond the common practice of buying and holding.
The intricacies of these updates can be explored in this article I wrote a few weeks ago. In summary, the premise of investing in Stacks is that it is an investment in the future convergence of Bitcoin and DeFi. As the former continues to grow and investors look to leverage their holdings in novel ways, Stacks should see its value increase in not only this bull market but also in the years to come.
3. Polygon
As prominent as Ethereum is, it does have some limitations, namely in speed and fees when the blockchain is congested. To remedy this, its developers plan on leveraging Layer 2 networks to promote scalability. There are several Ethereum-based Layer 2 solutions today, but one in particular is likely most worthy of an investment: Polygon (MATIC 3.25%).
In March, Ethereum unveiled its Dencun upgrade, which reduced Layer 2 fees and improved speeds. Naturally, there has been an influx in activity across all such blockchains, but Polygon stands out from a crowded field for several reasons.
First, it is unique in that it provides developers with a range of solutions to build applications all on a single network. Compared to other Layer 2 networks, which offer one approach to building, Polygon provides greater control and customization for developers when choosing the best scaling solution for their applications.
Second, it is in the process of its own upgrade that will introduce a slew of improvements. Known as Polygon 2.0, this update will unite all of the different applications built on Polygon and create a network of networks, in what Polygon hopes will make it become the value layer of the internet.
Last but not least, Polygon was one of the first Layer 2’s to enter the arena, and with that, it has built up a proven track record that makes it less risky for investors. With Ethereum’s clear strategy to rely on Layer 2 solutions for scaling in the future, Polygon’s established presence and innovative improvements position it for long-term success.
RJ Fulton has positions in Bitcoin, Ethereum, Polygon, and Stacks. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Polygon. The Motley Fool has a disclosure policy.
