Earlier this month, U.S. President Donald Trump announced the creation of the Strategic Bitcoin (CRYPTO: BTC) Reserve and the United States Digital Asset Stockpile. The former will hold Bitcoin — no surprises there. The latter will hold four more of the largest cryptocurrencies: Ethereum (CRYPTO: ETH), XRP (CRYPTO: XRP), Solana (CRYPTO: SOL), and Cardano (CRYPTO: ADA).
The fact that the U.S. is stockpiling crypto is exciting news for crypto investors. But are these good cryptocurrency investments? Let’s take a closer look at each one.
Bitcoin is the original cryptocurrency and has also been the most successful. At the time of writing, its market cap is $1.7 trillion, larger than that of every other cryptocurrency combined. Over the last three years (as of March 19), Bitcoin’s price has increased by 98%, well ahead of the S&P 500’s 27% return.
While Bitcoin was intended as a decentralized digital currency, transactions are too slow and expensive for it to work as a payment method. Processing times generally range from 10 minutes to over an hour, depending on network congestion, and fees are around $1 per transaction.
Despite that, Bitcoin has caught on as a digital store of value, or “digital gold.” The supply is capped at 21 million Bitcoin, adding an element of scarcity to it. If you’re looking for a way to hedge against inflation or add cryptocurrency to your portfolio, Bitcoin is worth considering.
Ethereum is the second-largest cryptocurrency by market cap, and it became popular through introducing smart contracts. A smart contract is a program built into a cryptocurrency’s blockchain network to record transactions.
Developers can use smart contracts to launch decentralized apps (dApps). This gives Ethereum a wide range of uses, including decentralized finance (DeFi) services, such as crypto lending platforms, blockchain gaming, and launching new crypto tokens.
Because Ethereum was the first to offer smart contracts, it has a large lead in terms of market share. According to DefiLlama, Ethereum currently has $46 billion in total value locked into its DeFi applications, the most of any blockchain.
On a negative note, Ethereum’s performance lags behind other smart contract blockchains. The average transaction fee is $0.19 as of March 19, compared to $0.00025 for rival Solana. Ethereum has also lost 34% of its value over the last three years. You’re better off avoiding Ethereum until it proves that it can reverse this downward trend.
XRP is the native cryptocurrency for Ripple, a blockchain designed as a cross-border payment solution. The current system of choice for international payments, the Society for Worldwide Interbank Financial Telecommunications (SWIFT), can take three to five days for international banking transfers. Fees generally cost $15 to $50, depending on the banks involved.
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On the Ripple blockchain, transactions process within four to five seconds for a fee of 0.00001 XRP, a fraction of a cent. In addition to being used for its minimal transaction fees, XRP is also a bridge currency used to facilitate international transfers.
With a real-world use case, XRP is one of the stronger crypto investments currently available. Over the last three years, it has topped every other cryptocurrency on this list with its 187% return. Its biggest headwind since 2020 has been a lawsuit from the Securities and Exchange Commission (SEC), but on March 19, RippleLabs CEO Brad Garlinghouse announced that the SEC had dropped the lawsuit.
Solana is a competitor to Ethereum, as it also provides developers with a platform to launch dApps. The difference is Solana’s unique proof-of-history system for validating transactions, which makes it a far more efficient blockchain.
As mentioned above, the average transaction fee on Solana is just $0.00025. It processes over 4,000 transactions per second (tps). In comparison, Ethereum processes about 17 tps, because it hasn’t developed a fast method to validate transactions like Solana has.
Like all cryptocurrencies, Solana is a high-risk, volatile investment. But it’s up 39% over the last three years, and its speed and low costs should continue attracting developers to the Solana ecosystem.
Cardano is another Ethereum competitor that supports smart contracts and allows for the development of dApps. It helped popularize the proof-of-stake system, where people who own a cryptocurrency can pledge their tokens to be part of the transaction validation process and earn rewards. The proof-of-stake system has minimal energy requirements, and even Ethereum adopted it in 2022.
One of the unique things about Cardano is the developers’ dedication to using peer review and evidence-based research. This hasn’t always been to its benefit, though. Cardano’s development has been notoriously slow. For example, it didn’t introduce smart contracts until 2021.
Cardano’s price has decreased by 18% in the last three years. As with Ethereum, it’s best to see if Cardano can build any forward momentum before committing your money to it.
Just because the U.S. government will be stocking up on these five cryptocurrencies doesn’t mean you should invest in all of them. Cryptocurrency is a risky, unproven asset class. Two of the cryptos on this list, Ethereum and Cardano, have lost value over the last three years. Even though the others have done well, they’re still highly volatile.
As far as crypto investments go, Bitcoin is the safest option, relatively speaking. It’s the most well-known cryptocurrency, and it has been the largest since the very beginning. If you’re looking for cryptocurrencies other than Bitcoin, XRP and Solana are two standout projects. With Bitcoin, XRP, and Solana, you could have a solid crypto portfolio that covers multiple use cases.
No matter which cryptos you choose, be careful about your asset allocation. Because of the risk involved, cryptocurrency shouldn’t be more than 5% to 10% of your portfolio. Use the rest to invest in stocks, bonds, and other stable assets.
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Lyle Daly has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.
President Trump Is Planning a Crypto Reserve With These 5 Coins. Should You Invest in Them? was originally published by The Motley Fool
