Two years ago, I published an article titled “The Top 25 Cryptocurrencies to Know in 2021.”
It was fortuitous timing. The “everything bubble” was in full swing, and inflation was still a distant memory of the 1980s. Within a year, the list of my 5-starred cryptocurrencies had returned 420%. One of them — Dogecoin (DOGE-USD) — would jump 1,790%!
But the good times obviously couldn’t last. Rising prices and excess liquidity meant markets would eventually look like the late-1980s… and not in a good way. The Federal Reserve began to tighten policy in April 2022, and by December, cryptocurrencies had notched a 64% loss.
That makes 2023 a strange year for crypto. On the one hand, heightened interest rates should continue pressuring cryptocurrency prices; Bitcoin (BTC-USD) is a historically pro-cyclical asset that rises and falls with the market. An expected slowdown by Q3 or Q4 should depress values of cryptos.
Other the other hand, crises at regional banks this year have highlighted the weaknesses of official financial institutions. According to Antoni Trenchev, co-founder of crypto trading platform Nexo, his firm has “seen a flight to Bitcoin” this year as fearful investors were reminded of “structural deficiencies of the U.S. banking system.”
Bitcoin itself is already up 70% this year.
The Top 28 Cryptos to Know in 2023
These conflicting signals make cryptocurrencies a potentially volatile bet for 2023. Bulls will argue that cryptos offer an alternative to a broken financial system in the U.S., and that wagers on Bitcoin should pay off handsomely. They also see crypto as a way to dislodge profit-maximizing incumbents like Visa (NYSE:V) and payment processing firm Fiserv (NYSE:FISV).
Many are also hoping to get wealthy from their investments.
Meanwhile, crypto skeptics will rightly note that cryptocurrencies have no intrinsic value. To these discerning investors, digital currencies are a massive game of transferring wealth from one party to another… much like gold or other non-earning commodities. (Even crypto staking is more of a wealth transfer than a source of new money).
That makes the performance of cryptocurrencies in 2023 anyone’s guess. Wall Street analysts have consistently missed price targets by enormous margins, and I’m not in the business of making that same mistake.
Nevertheless, my 2021 study of cryptocurrencies shows that fundamental analysis can help long-term investors find promising cryptocurrencies while avoiding the duds. My 5-star rated cryptos have outperformed the 1-star ones by an enormous 6.6-to-1 margin. In this article, I unveil my updated list for 2023.
Ethereum (ETH-USD)
Source: Shutterstock
A successful shift to a Proof of Stake (PoS) protocol keeps the world’s largest altcoin ahead.
Approximate Market Cap: $220 billion
Year Established: 2015
Return Since 2021: 61%
Score: ★★★★★
Ether, the cryptocurrency of the Ethereum blockchain, continues to delight fans. In Sept. 2022, the popular cryptocurrency completed its switch from an older Proof of Work (PoW) protocol to an energy-efficient Proof of Stake (PoS) one in a near-seamless shift. The “new” Ethereum now consumes less than 0.004% of the energy as before, and transactions are around two-thirds cheaper. That puts it on the same technological footing as third-generation coins like Cardano, while keeping its first-mover advantage in NFTs alive. Ethereum is also the source of tokens like Shiba Inu.
That said, Ethereum often feels like a tool searching for practical use. Few real-world transactions outside of NFTs are done on the Ethereum network, and its smart contracts remain too complicated for most people. Super Bowl squares among office coworkers have yet to migrate from whiteboards to smart contracts.
Yet, Ethereum and its foundational members have shown that quality matters. Ethereum remains the largest altcoin in the world thanks to its strong development team, and it continues to earn a five-star ranking on my list.
Bitcoin (BTC-USD)
Source: Shutterstock
The world’s largest cryptocurrency shows that popularity matters.
Approximate Market Cap: $550 billion
Year Established: 2009
Return Since 2021: -19%
Score: ★★★★★
Technologists have long worried about the energy intensity of Bitcoin, a cryptocurrency that consumes around as much electricity as the country of Australia. Its relatively inefficient Proof of Work protocol means that all work beyond a certain point is “wasted,” solving ever-more complex problems while generating no additional benefit.
Yet, Bitcoin remains living proof that its popularity matters. Almost half of the world’s cryptocurrency remains denominated in BTC, and each “crypto winter” tends to see a spike in its relative…
Read More: The Top 28 Cryptocurrencies to Know in 2023