It’s safe to say that 2022 will be remembered as a bad year for virtually every major cryptocurrency on the market, from Bitcoin to BitDAO. This is largely due to macroeconomic reasons, with rising inflation and interest rates severely depressing investor sentiment. However, as far as cryptocurrencies themselves are concerned, things have often changed for the better, with Ethereum’s Merge and Cardano’s Vasil among the biggest updates of last year.
These developments have shown that a bear market does not mean the end of growth for cryptocurrencies, which are now even better positioned to ride an expanding global economy than the last bull market.
Given that the market likely bottomed out last year, 2023 could end up being a very positive year for cryptocurrencies, especially if the macroeconomic picture improves. Therefore, we have put together a selection of the five best cryptocurrencies to buy in 2023. This list was compiled on the assumption that the bear market could continue for a few more months, but that conditions could become more bullish in the following months, helping more than a few coins to record significant gains.
As always this article is not financial advice and investing in cryptocurrencies is inherently risky, so proceed with caution.
Table of Contents:
Bitcoin (BTC)
Yes, bitcoin (BTC) might be the obvious choice here, but it’s for very good reasons. As the first cryptocurrency on the market, BTC benefits from significant network effects, while its hard cap and deflationary tokenomics make it the most bankable digital asset in the long term.
It’s worth mentioning that bitcoin has attracted the most institutional and corporate investment, with an October 2022 BIS report finding that banks around the world own over $9 billion in cryptocurrency, with 56% of this in bitcoin or bitcoin-based derivatives (compared to 32% for ethereum and ethereum-based derivatives). Similarly, companies like Tesla and MicroStrategy bought large amounts of BTC in previous years, something no other cryptocurrency can boast.
Not only is bitcoin the most attractive long-term investment prospect in the cryptocurrency market, but it has enjoyed a number of notable developments throughout 2022. This includes the continued growth of its second-tier Lightning Network (expanding its capacity from 3,311 to 5,158 BTC last year), the launch of the Machankura mobile payment app in Africa, and the release of the Taro protocol on the Lightning Network (enabling tokenization of assets on Bitcoin).
Finally, history has shown that BTC’s dominance tends to increase during bear markets, which it has done in recent months. Not only that, but that tends to drive new bull markets, making it arguably the best investment during recessions.
Ethereum (ETH)
Ethereum is another obvious choice for obvious reasons, with its blockchain conveniently remaining the largest tier one smart contract platform in the cryptocurrency ecosystem in terms of total locked value.
Just looking at the numbers, Ethereum’s total value locked in stands at $23 billion, compared to $4 billion for its closest rival, BNB Chain. This represents 59% of the entire crypto/DeFi ecosystem, a percentage that will likely increase now that Ethereum has completed its shift to a proof-of-stake consensus mechanism, something that will make it more scalable and efficient in the long run.
In addition, the merger and recent updates (e.g. EIP 1559) look set to make ethereum (ETH) deflationary. This is because EIP 1559 introduces a burn of transaction fees, while switching to PoS means that less new ETH is minted.
Combined with its own network effects, Ethereum is in a very strong position to continue expanding, meaning ETH is one of the cryptocurrencies best positioned to ride a new bull market.
Lido DAO (LDO)
Lido DAO has recently become the largest DeFi platform in the cryptocurrency ecosystem. This is in terms of total locked value (i.e. the amount of cryptocurrency stored on its platform), which currently stands at $6.17 billion, putting it ahead of closest rival MakerDAO and also ahead of every tier blockchain besides Ethereum (which it runs on).
The reason Lido DAO has grown so much is that it is by far the most popular staking service for Ethereum staking. As mentioned above, Ethereum switched to a proof-of-stake consensus mechanism in September, with most holders using Lido to bet their ETH and earn staking returns. It is in this context that LDO has benefited, with the native token having various use cases within the Lido network. This includes as a governance token granting voting rights on development proposals and the use of Lido DAO’s treasury, while it can also be used to pay transaction and network fees, with Lido also paying LDO as a reward for certain types of picketing.
Lido DAO became even more popular from December onwards, when Ethereum developers confirmed that stakers could start retiring their ETH bet from around March this year. This has apparently caused a run to the Lido, with the ongoing bear market making the stakes more attractive. Therefore, expect LDO to have a great 2023.
Toncoin (TON)
TON is the native token of The Open Network, a proof-of-stake blockchain originally founded by Telegram. While the popular social messaging app drove the blockchain, it was sued by the SEC in 2019 and settled with the securities regulator in 2020, agreeing to reimburse the $1.2 billion it had raised in an initial coin offering.
Following the case, Telegram ceded control of The Open Network, with its development community taking over. Fast forward to the present day and The Open Network is gaining significant traction, with Telegram itself announcing in November that it will launch Fragment, an auction platform (for Telegram usernames) that runs on The Open Network. It followed this bullish announcement with another in December, when it revealed a feature whereby users can sign up for an account on its app by paying TON, rather than entering their phone numbers.
TON rallied after these announcements, with the reason that they suggested that Telegram – with its 700 million monthly active users – could integrate further with The Open Network.
Monero (XMR)
Monero (XMR) is the dark horse of the cryptocurrency market, and in more ways than one. On the one hand, its status as the largest privacy coin by market cap (by a wide margin) means that it will help legitimate users and criminals evade surveillance, for better or worse. On the other hand, the combination of its genuine usefulness with the lack of fashionable memes means that it often goes under the radar of many investors.
The Monero use case gained a boost last August when the U.S. Treasury sanctioned Tornado Cash, a blending service that provides cryptocurrency holders with anonymity. It also sanctioned another mixing service, Blender.io, in July of the same year, suggesting that the days of mixing services could be numbered. However, privacy coins as a group have increased in value as a result, and while the price of XMR has now fallen by 7.8% compared to where it was since the Tornado Cash ban (on August 8), it has held up very well compared to bitcoin and ethereum, for example, which fell by 27% and 26% over the same period.
Honorable mentions
Ripple
(XRP) – could increase massively if Ripple wins its lawsuit against the SEC, although this is a big “if”.
Dogecoin (DOGE) – could benefit from Twitter integration, if Elon Musk’s early suggestions are to be believed.
Cardano (ADA) – often enjoys most of the development activities of any large network and can be grossly underestimated compared to its long-term potential.
Polygon (MATIC) – the largest second-tier scaling solution for Ethereum, so it will likely benefit from Ethereum’s dominance and growth.
Internet Computer (ICP) – another layer one network that has a lot of development potential, but has yet to realize that potential in a big rally.
