If you’ve been following the cryptocurrency markets for a long time (basically any time before December 2017, since time moves so fast in crypto land), you’ll realize that good tech wins out in the end. This means that over the long term, cryptocurrencies that add value to various technology platforms surrounding the space outperform gimmicks and speculative tokens. So if you want to hedge your bets, you need to pick out the best cryptocurrencies that aren’t speculative, solve real problems, have talented teams and have a reason to exist.
My article on the Safest Cryptocurrency Bets for 2018 did really well because I tried to follow the same line of thinking in choosing those coins, and they’ve held through the Jan/Feb dip.
Dividing your cryptocurrency portfolio into various functionality based use cases is one of the best ways to think about your assets. Let’s say supply chain tokens really take off in the next year or so, you don’t want to be left holding only currency coins. If platform tokens take a back seat to currency coins, you would want to hold some Litecoin or Nano. This article explores how hedging your bets with the best coins from various functionality perspectives would look like.
For this, I’ve chosen the following cryptocurrency function categories:
- Supply chain cryptocurrency
- Pure transactional cryptocurrency
- Privacy/Untraceable cryptocurrency
- dApp protocol cryptocurrency
- Exchange specific cryptocurrency
- The safest bet: a god tier store of value
Supply Chain Cryptocurrency: Waltonchain
This was a tough choice between the many likely contenders for success. Between Vechain, Waltonchain, INS Ecosystem, Ambrosus, QTUM, Shipchain and Origintrail, there’s a variety of projects with a huge depth of potential in this space. I chose Walton (WTC) because it’s the first mover and has the most stable partnerships, so if I were going for safe bets over potential 50x moon shots, this would be my choice. Waltonchain builds multi-layered programmable application interfaces, focuses on RFID tagging, and essentially forms a network for supply chain and inventory management. Compared to its peers, it’s further along the development pipeline and has completed major milestones recently such as its rebranding and industry partnerships (China Mobile, Fuyao Glass, Fujian ST Electronics).
While Ambrosus and INS are really interesting projects (they feature on my list for undervalued coins you can buy on Binance), they’re still low market-cap projects with a high degree of risk. Waltonchain has its ups and downs like any coin, but at this point in time it has more credibility than its competitor Vechain. With the Vechain rebranding imminent, the lack of details on the masternode sustainability, and its really weird trading volumes on Lbank, I would place my eggs in the Walton basket.
Pure Transactional Cryptocurrency: Nano
Transacting is a core function of cryptocurrency – it’s in the world itself. As Bitcoin slides into lower daily volumes (its lowest since 2016), coins like Bitcoin Cash, Ethereum and Nano are picking up the slack. Ethereum, while being a decent way to exchange value, doesn’t really fulfill the ‘purely transactional’ criteria. Neither does Ripple, since it’s being developed to be used as a messaging layer between banks. This leaves a few contenders like Bitcoin Cash, Litecoin and Nano. If you’re betting on an increase in the cryptocurrency on basically any metric (number of users, volume or merchant adoption) this year, you’re also betting that some project will emerge as the definitive medium of value transfer between users, merchants and exchanges.
I’ve chosen Nano over Litecoin and Bitcoin Cash, because it has the largest scope for growth. The recent ‘Bitgrail hack‘ wasn’t a flaw with the technology of the network – the price dip was purely speculative and emotional. I still think Nano is one of the contenders for the most promising cryptocurrencies of the year. As for Litecoin, its Github activity is one of the lowest of any top 20 cryptocurrencies, and the fact that the founder sold his coins at the absolute all time high sends mixed signals on the project’s future relevancy. I’ve written more about the flaws with Bitcoin Cash in this article, and I’ve written about the incentive for users to run Nano nodes in this article.
Privacy Cryptocurrency: Monero
Is there really any choice in this category? I think it makes more sense to explain why there’s a privacy category rather than why Monero is the choice here. A privacy coin is a hedge against government regulation and loss of fungibility of crypto-assets. As the cryptocurrency markets develops, ‘hacked coins’ or coins that are known to have traversed through mediums that an institution doesn’t like, loses its value compared to other coins. It’s possible there’s a future where certain Bitcoins, with its publicly available ledger, become ‘blacklisted’ from major exchanges because it’s been through the hands of some shady individuals or governments. As Bitcoin and cryptocurrency becomes more popular, it’s also more likely that government regulation decreases the free flow of crypto-assets. An untraceable privacy coin like Monero gets around these barriers.
There are still some problems with Monero – some exchanges might ban huge volumes of Monero transactions under “anti money laundering regulations”. Competitors like Zclassic, Sumokoin and Bitcoin Private might prove to overthrow the king, but it will take a while before their tech is proven to be bulletproof. Enigma deserves a special mention as a potential smart contract+privacy behemoth. The technology behind Monero is solid, and similar to Bitcoin, the longer a cryptocurrency remains standing (without being hacked), the more valuable the network becomes.
Decentralized Application Protocol Cryptocurrency: 0x Protocol
There’s a lot of competition in this space:
- Ethereum
- EOS
- NEM
- Cardano
- NEO
- Lisk
And that’s just in the top 20 cryptocurrencies. If you go a little further down the list on Coinmarketcap, you’ll find a slew of great projects like Kyber Network, Enigma, and NULS. Protocols are going to be the backbone of the cryptocurrency technology boom. As the Winklevii said, “It allows you to own the racing field and not the horse. You don’t care who wins as long as the races are happening.”
The 0x protocol, on the other hand, is a very promising solution to the increasingly fragmented Ethereum ecosystem. While Ethereum has so far been the only real smart contract and tokenization platform, 0x allows multiple tokens to be exchanged on its own platform for free, which brings the advantages of network effects and interoperability between various ERC20 tokens. 0x has plans to operate with all cryptocurrencies in the future. It’s essentially a decentralized exchange relayer, and many projects, such as district0x and Ethfinex, are already using the 0x protocol. 0x is a riskier bet than Ethereum or NEO, but it’s a working product with a well-detailed roadmap.
Exchange Specific Cryptocurrency: Binance Coin
Exchanges are starting to use crypto-economics to offer incentives that bring people to their platform. A referral program simply isn’t enough to sway people to use a new exchange. This is where a token comes in, and most of them provide additional incentives such as reduced trading fees and volume based rewards. Binance went from being unknown to the largest exchange in the world in the span of 6 months. Its founder is an ex-Wall Street maverick who’s now a billionaire thanks to Binance’s low fees, popular referral program, huge list of coins and service reliability. An exchange token is an important part of any diverse asset portfolio since it represents volumes and interests of all coins on that exchange, as well as the growth of cryptocurrencies as a whole.
Binance beats out other exchange tokens such as Coss, Kucoin Shares, and DOT because of Binance’s reputation and growth over the last year. With ever increasing volumes, an influx of new users as well as BNB token burn, Binance is the safest exchange token bet.
The Safest Cryptocurrency Bet
The answer is still the same as in my article on the top safest cryptocurrency bets. So check out that article for the answer. Hint: it’s not any of the 5 on this list.
Conclusion
The 5 best cryptocurrencies from different functionality perspectives are:
- Supply chain cryptocurrency: Waltonchain
- Pure transactional cryptocurrency: Nano
- Privacy/Untraceable cryptocurrency: Monero
- dApp protocol cryptocurrency: 0x Protocol
- Exchange specific cryptocurrency: Binance Coin
A good portfolio should have a good balance of risky as well as safe bets. It should also be functionally diverse, and split across several market cap categories. The cryptocurrencies on this list are large market cap cryptos with established identities and use cases. Factors that I’ve used to create this list are time the technology has been around, its competition, use case and market cap. If you think I’ve missed out on a crypto or an important category, leave a comment below or on Twitter or Facebook!
Where to Buy: You can buy and trade all of these coins on Binance
If you’re looking for some riskier, low market cap cryptocurrencies that are undervalued and have the chance to 100x your investment, check out this article.
(Disclaimer: Links to exchanges may include our referral links. This article is also not financial advice.)