What's the Next Big Thing in Cryptocurrency?

So you want to buy the next big cryptocurrency, the type of investment that could grant your great-great-grandson the ability to retire from the labor market before he has fully developed in the womb? A nice idea! But join the line—predicting the future is a tricky game to get into, particularly in volatile cryptocurrency markets.

There are plenty of rising coins, and we’ll discuss them here along with a few tips to help you judge what’s likely to become the next cryptocurrency to explode. Some investments could perhaps even be the next Bitcoin, and the crypto market can often be one in which rising tides lift all boats. But we’ll also teach you how to be careful; plenty more coins are passing fads at best, scams at worst.

The thing is, top crypto investors would like to tell you that the new crypto coins into which they have plunged their children’s college fund are the best cryptocurrencies to invest in. Not all of them can be correct. What’s more, roadmaps from failing coins frequently claim that the thing that will save the next big cryptocurrency from imminent collapse is just around the corner, and decentralized finance robo-advisors tout stratospheric annual percentage yields, only for them to crash or turn out to be Ponzi schemes days later.

That makes finding tomorrow’s most popular cryptocurrency a Sisyphean task, made much harder by the legions of boosters, hustlers, and swindlers whose own worth relies on their ability to make you part with your money. That sounds mighty cynical, but stay in the crypto game for just a few weeks and this will start to seem prudent.

A good first step to identifying the next big cryptocurrency by market cap is to look at wider market trends. The cryptocurrency market is always excited about something in the news, and remember once again that a lot of excitement is manufactured by people with a vested interest in their own success. Some trends have a ways to go, some might have already peaked and others yet might turn out to be useless. But it’s a good place to find some inspiration.

NFTs

NFTs, or non-fungible tokens, were all the rage in 2021, and their strong community suggests that the market could continue to expand. NFTs are unique, one-of-a-kind cryptocurrency tokens that live on the blockchain, usually representing pieces of art. These cryptocurrency tokens can list for millions, and one by a digital artist called Beeple sold for $69 million in February 2021.

NFTs boomed once again in the summer when so-called profile picture NFT projects went viral. These are tokens that holders can use to represent their online personas on social media sites like Twitter, or in games throughout the metaverse. The most successful projects, like the Bored Ape Yacht Club, benefited from strong communities and brand partnerships. BAYC, along with a few others, partnered with Adidas, for instance, and derivative projects also blew up.

It’s difficult to predict the next big NFT project. There are so many talented artists in the space, and it’s nearly impossible to determine which ones will capture the hearts of investors. You can see the largest ones on CryptoSlam; Axie Infinity, CryptoPunks, and Art Blocks have each generated over a billion dollars in total sales, most of which occurred this year.

Getting in early on NFT projects is very tricky. You have to follow the right people on Twitter and get in on a sale within minutes of it being shared on social media. Loot, a conceptual text-based ‘game’, sold out in about an hour, and NFTs later sold for hundreds of thousands of dollars. A lot of these projects are flash-in-the-pans. Loot’s lost most of its value, as have lots of other NFT projects.

How to stay safe in NFT investing

NFT investing is a very risky market. You’re spending a fair chunk of change for what is often a highly illiquid asset that you could struggle to shift. Grifters mint NFTs like crazy in the hopes that unsuspecting buyers, who have to purchase these things with little prior research to avoid being outbid or bested by another stranger on the internet, will struggle to discern whether a project is legitimate.

There’s the risk of plagiarism, too. Although NFT tokens are unique, the pictures they represent are not. You may have seen the meme about “right-click save-as,” which jokes that NFTs are worthless because you can copy JPEGs to your computer without buying an NFT. Scammers might right-click save-as on a popular NFT project, turn it into an NFT of their own, and then fraudulently market it as part of the original project. Check for blue ticks on marketplaces like OpenSea.

Artists and developers might also make promises they have no intention of keeping, like plans to, say, build a videogame around the project. Sometimes the community just fades away and you’re left with nothing more than a Microsoft Paint image of a house. Don’t invest more than you can expect to lose.

DeFi

Decentralized finance tokens grew in value in 2020 and 2021, and the next major DeFi project could prove immensely valuable to early investors.

Decentralized finance, or DeFi, refers to non-custodial financial platforms that do not require intermediaries like banks or governments in order to operate. Services offered include decentralized cryptocurrency exchanges, non-custodial lending protocols and robo-advisors known as yield farms.

The DeFi market blew up in the summer of 2020 after protocols introduced so-called governance tokens. You could earn these by using the protocol and then use them to govern how the protocol operates.

For legal reasons, governance tokens were often marketed as having no financial value, but sky-high prices show that they were anything but. Some people took out loans on protocols like Compound just to earn them, and the amount locked in DeFi protocols grew from $1 billion in January 2020 to $200 billion by December 2021, according to data on CoinGecko. CoinGecko records the total market capitalization of DeFi tokens as $142 billion.

Coders are still coming up with novel ways to decentralize the financial system. One movement, known as DeFi 2.0., introduces more decentralized financial services and strengthens existing ones.

It’s not yet clear exactly what DeFi 2.0. entails, but certain ideas are more prominent than others. Olympus DAO introduces decentralized crypto-based bonds, and others, like Tokemak, innovate on liquidity mining—the process by which these governance tokens are harvested​​—to make the whole market more sustainable.

The future of cryptocurrency and DeFi seems intent on strengthening the offering of the services on the market today, making protocols more resilient against the shocks and scams that have hurt the market for the past couple of years.

There are several ways to profit from decentralized finance protocols. First, you could stake your funds in a protocol and reap a cut of the money the protocol earns. Liquidity providers on decentralized exchanges earn trading fees, lenders earn interest, and investors in yield farms earn governance tokens.

Second, you can always buy DeFi tokens outright. Similar to conventional index funds, decentralized index funds like Index Coop’s DPI tokens, or pools in Balancer, track the largest ones and rebalance the portfolio automatically according to the ebb and flow of the market.

How to stay safe in DeFi

DeFi looks very attractive, with many protocols offering crazily high yields. But the space is rife with scams and hacks, and it’s easy to lose your money. No protocols are too big to fail. These traps aren’t easy to avoid: founders are often anonymous and the largest profits are often made by early investors who may not have the time to research things.

Conventional investment adages apply when investing in DeFi: Don’t invest more than you can afford to lose, don’t invest in anything you don’t understand, try and research your investments as much as possible and diversify your investments. Also, understand the risks. Lots of these protocols are unaudited and bugs can be fatal. Steer clear of developers who give off bad impressions, and don’t let anyone pressure you into investing in something you don’t feel comfortable with.

Ethereum killers and scaling solutions

Ethereum is the largest blockchain network that supports smart contracts, bits of code that power decentralized applications, like NFTs and DeFi protocols. Ethereum is in the process of upgrading itself,in a project that developers formerly referred to as Ethereum 2.0., which should resolve some of the problems that people have had with the network, namely that it is slow and expensive to use. Transactions can cost hundreds of dollars and take several minutes to process. Ethereum’s brain trust has now backed away from the Ethereum 2.0 term, arguing that the upgrade will seamlessly integrate with the existing functionality of the chain. In any case, while the Ethereum Foundation expects that upgrades could continue well into next year, lots of other blockchains claim to do what Ethereum’s upgrade promises better and, crucially, today.

Top competitors, frequently dubbed “Ethereum Killers,” include Avalanche, Solana, Fantom, and Cardano. There are about half a dozen more, and each has its own take on how it will become the smart contract blockchain du jour. Avalanche, Solana, and Fantom stick out because they all blew up in 2021 after attracting investment from high profile backers, such as Matthew Graham’s Sino Global Capital.

The burning question is whether these Ethereum rivals will continue to maintain their speed and cheapness as they become more popular, or whether they will become as slow and expensive as Ethereum.

Ethereum rivals must also compete with Ethereum itself. Ethereum already has a vast network of developers, who may remain loyal to the blockchain on which they already know how to build.

Ethereum developers are also creating so-called scaling solutions that resolve problems with the Ethereum blockchain.

Zk-rollups, optimistic rollups, plasma, and sharding are examples of scaling technologies that are employed by projects like Arbitrum, Boba, OMG Network, Polygon, and more. If scaling solutions make Ethereum just as cheap and easy to use as rival blockchains, people might stick with Ethereum.

How to stay safe when investing in scaling solutions and ‘Ethereum killers’

Not all Ethereum killers and scaling solutions are successful. ICP, also known as Dfinity, was a huge project considered to be the next Ethereum killer that just…wasn’t. Nor was EOS, nor Ethereum Classic, nor countless others.

Note that lots of projects, like Binance Smart Chain, EOS, and scaling solutions, sacrifice some of Ethereum’s advantages, like decentralization, to make things faster. Such projects often say they do not sacrifice decentralization, but these claims fall apart upon close inspection.

Crypto games and the metaverse

Some analysts think that the metaverse, and the games and spaces within it, will be the next big thing in crypto. Precisely what the metaverse is is a little unclear, but generally it is used to refer to self-contained online worlds where you can express your online persona. Think Second Life or World of Warcraft… but with better graphics. Lots of these metaverse projects employ blockchain technology, and the main difference is that they are player-owned rather than run by a company. Imagine if World of Warcraft wasn’t created by Blizzard but instead operated as a cooperative that bent to the demands of players.

Since most online worlds are games, in one way or another, the metaverse goes hand in hand with play-to-earn, a new genre of videogames that pays you for playing them. Axie Infinity, a Pokémon-inspired monster battling game, is the most popular example of this, but metaverse games like The Sandbox and Decentraland are also booming. Lots of these games also employ NFTs to help you express yourself online.

The metaverse and play-to-earn are new markets, but they already contain some of the bad actors that were present in the rise of cryptocurrencies in 2017 and with the DeFi and NFT booms of 2020 and 2021. Some projects are out to swindle those new to the cryptocurrency markets. Some games are likely to be cash grabs and others little more than Ponzi schemes. Developers may abandon the project once they have enough money and may leave you high and dry. With such an experimental and buzzy space, exercise caution and due diligence.