Bitcoin is currently flirting with all-time highs. The digital asset has had an epic run over the past two years, but its performance is likely to slow down. Here’s what investors need to know about the future of digital assets.
Bitcoin’s growth is slowing
Take a look at Bitcoin’s chart. Over the past 12 months, it’s up 300%. That’s not bad, but nowhere near the pace at which it was surging early in its history. The Bitcoin booms of 2017 and 2013 were much greater based on percentage.
That’s because of a concept known as the law of large numbers. Essentially, the larger the number, the more difficult it is to perform in percentages. When Bitcoin was a billion-dollar asset, $10 million added 1% to its value. Now that it’s worth $1.2 trillion, $10 million barely even moves the needle.
That’s why Bitcoin’s growth is slowing. It’s also why smaller, lesser-known cryptos are outperforming.
Smaller performers
Ethereum is much smaller than BTC, which is why it has outperformed. ETH is up 900% over the same 12-month period. Going further, smaller assets have even outperformed Ether. Solana is up 10,573%, while Axie Infinity’s AXS token is up 55,708% over the same period.
These are the three cryptocurrencies I expect to keep outperforming BTC over the long term.
There’s no doubt that smaller cryptocurrencies have a tendency to deliver better performance. But this also comes with added risk. Smaller, lesser-known cryptocurrencies aren’t as vetted as the larger rivals. The development team and community are much smaller, which leaves plenty of space for bad actors to have a major impact.
Not to mention the fact that spotting the “next big thing,” is complicated. The whole market could decline next year or the best-performing cryptocurrency could be a dog-themed meme coin. Who knows?
What should investors do?
Rather than trying to find the next big thing, investors should buy something that’s exposed to everything. In other words, betting on a service provider who benefits from the rising popularity of all cryptocurrencies.
Banxa Holdings (TSXV: BNXA) is my top pick here. The company helps corporate giants accept cryptocurrencies. It helps these clients convert their users’ fiat capital into digital assets while handling compliance on their behalf. Banxa’s know-your-customer (KYC) and anti-money laundering (AML) systems allow it to operate in over 136 countries.
Banxa’s business model is based on the number of users who adopt cryptocurrencies and the value of their transactions. In other words, it doesn’t matter if users are converting their dollars into Shiba Inu or trading Dogecoin, or plowing billions into NFTs. As long as the industry is growing, Banxa benefits.
This is why Banxa is on the top of my crypto watch list.
Bottom line
While Bitcoin’s performance has been remarkable, smaller cryptocurrencies have outperformed. The law of large numbers is at play here and small cryptocurrencies like AXS, ETH and SOL should outperform BTC.
However, you could bet on the expansion of the entire digital asset sector through Banxa Holdings.
