If you invested in stocks during the coronavirus crash, there’s a good chance you’re sitting pretty right now. The benchmark S&P 500 has more than doubled since hitting its pandemic low in March 2020.
But if you instead chose to buy cryptocurrencies, “sitting pretty” would be something of an understatement. Since the March 2020 trough, the aggregate value of all cryptocurrencies has grown more than 19-fold to $2.67 trillion.
Although crypto’s Big Two, Bitcoin and Ethereum (CRYPTO:ETH), are responsible for a large percentage of this market-value creation, they’ve taken a back seat to some enormous gains from lesser-known coins this year. Since 2021 began, this trio has skyrocketed higher by 10,923% to as much as 61,451,955% (not a typo!), as of Nov. 21.
Solana: Year-to-date gain of 14,322%
The first crypto superstar in 2021 is Solana (CRYPTO:SOL). This relatively unknown digital currency began the year at roughly $1.61 per token and has since galloped higher to around $230 per coin. That’s a cool gain of 14,322% for its holders.
The reason Solana is turning heads is very simple: speed.
The expectation with blockchain technology is that it’ll expedite the validation and settlement of cross-border payments for a fraction of the cost of today’s financial infrastructure. It’ll also democratize the payment process by allowing the currently underbanked to take part. With Solana, transactions cost an average of just $0.00025, which means it would take about 4,000 transactions to tally a mere $1 in transfer fees.
More importantly, Solana’s scale is rivaled by very few blockchain projects. Whereas Bitcoin and Ethereum have been handling a respective seven and 13 transactions per second (TPS), Solana is capable of a whopping 50,000 TPS. For context, that’s slightly more than double the 24,000 TPS claimed by payment-processing giant Visa.
Something else unique about Solana that helps power its lightning-quick blockchain network is its proof-of-history protocol. Instead of relying on validators to talk to each other to define the amount of time that’s occurred between events, Solana’s proof-of-history protocol establishes a record of the amount of time that’s passed between events. This dramatically speeds up the processing capabilities of the network.
Given its competitive edge when it comes to speed, Solana is a good bet to be a leading network for decentralized-application development.
The Sandbox: Year-to-date gain of 10,923%
Another cryptocurrency that’s come out of nowhere to capture the attention of investors is The Sandbox (CRYPTO:SAND). It began the year below $0.04 per token, but was north of $4 per coin on Nov. 21. If preciseness is your thing, we’re talking about a year-to-date gain of 10,923%.
There look to be two reasons for The Sandbox’s insane gains in 2021. First, there’s the growing hype surrounding the metaverse, which is something of an advanced version of the internet that allows for 3-D virtual environments and interactions. Meta Platforms, the parent company of Facebook, has announced plans to spend aggressively on the metaverse, and other companies have followed suit.
The Sandbox is entirely focused on the metaverse. It’s a virtual world built on the Ethereum blockchain that allows gamers to create and monetize their own virtual worlds with SAND, the primary token of the platform.
The second driver looks to be investors’ insatiable appetite for non-fungible tokens (NFTs), which provide irrefutable ownership evidence of a video, photo, or digital file, stored on blockchain. We’ve witnessed select NFTs sell for millions of dollars this year.
What makes The Sandbox so interesting is that it allows its virtual-game developers ownership of their digital assets as NFTs. These NFTs are sometimes integrated into the games being developed, but can also be added to The Sandbox’s marketplace for monetization.
While it’s not entirely clear what the long term holds for this previously obscure digital currency, there’s no denying that the metaverse and NFTs are drawing in some big money right now.
Shiba Inu: Year-to-date gain of 61,451,955%
But the crème-de-la-crème of year-to-date gains belongs to meme-based coin Shiba Inu (CRYPTO:SHIB). When the year began, SHIB tokens were going for $0.000000000073 each. As of Nov. 21, SHIB was nearly at $0.000045 per coin. While it might be tough to tell with all these zeroes in the way, this amounts to a gain of 61,451,955%. Put another way, if you invested $1.63 into Shiba Inu to begin the year, you’re a millionaire now.
Shiba Inu’s gains have come from a confluence of factors, including:
- The launch of decentralized exchange ShibaSwap in July, which is improving liquidity and encouraging longer hold times
- SHIB being accepted for listing on a growing number of crypto exchanges
- Elon Musk’s tweets/memes involving Shiba Inu-breed dogs
- The landing of its first major merchant, AMC Entertainment
On the other hand, there’s an equally long list of reasons Shiba Inu should be avoided like the plague. Chief among them is its lack of a competitive edge. Whereas Solana offers clear-cut real-world potential, Shiba Inu’s real-world utility is nonexistent. Just 138 merchants globally welcome SHIB as a form of payment, according to online business directory Cryptwerk.
As an ERC-20 token built on the Ethereum blockchain, Shiba Inu is also tethered to the negatives of the Ethereum network — namely, high transaction fees and potential processing lag times. There’s nothing that would coerce businesses to choose Shiba Inu over other payment coins.
Lastly, there’s a strong probability of a big reversion from Shiba Inu following these monstrous gains. Previous life-altering gains in the crypto space have been followed by losses ranging from 93% to 99%. Already down close to 50% from its all-time high that was set on Oct. 27, SHIB is worth avoiding.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.