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Cryptocurrency is digital money that's not managed by a centralized system, such as a government.

Instead, they're based on blockchain technology, with Bitcoin being the most popular. As digital money continues to gain traction on Wall Street, so do more and more options. 

While you can use cryptocurrencies for purchases, most people consider them as a long-term investment. However, volatility makes investing in cryptocurrencies risky, as evidenced by the recent freefall of cryptocurrencies, including stablecoins pegged to the U.S. dollar. It's important to know what you're getting into before you buy in.

The following top eight cryptocurrencies could prove to be worthwhile investments in 2022.

1. bitcoin (BTC)

Bitcoin has been around the longest of all cryptocurrencies. With a price and market capitalization much higher than any other crypto investment option, it's easy to see why it's the market leader.

Many businesses already accept Bitcoin as a payment method, making this cryptocurrency a smart investment. Visa, for example, processes transactions with Bitcoin. And after a four-year cryptocurrency hiatus, Stripe will also allow its customers to accept bitcoin payments. Major banks have also started to include bitcoin transactions in their offerings.

Tesla has only accepted Bitcoin for a short time, but may do so again if Bitcoin mining becomes more environmentally friendly. In a step in that direction, Blockstream and Block, formerly known as Square, are launching a Bitcoin mine in Texas powered entirely by Tesla's solar array and Megapack battery, CNBC reported April 8.

Bitcoin also received a boost in May when the Luna Foundation Guard announced it would lend $1.5 billion in Bitcoin and Terra USD loans to stabilize the latter, Fortune reported. Investment firm VanEck is also trying to launch an exchange-traded bitcoin fund. The Securities and Exchange Commission rejected the company's first application and delayed a decision on its latest application until Oct. 11.

Risks of investing in bitcoin

The value of bitcoin tends to fluctuate wildly. Over the course of a month, the price can rise or fall by thousands of dollars. That's certainly been the case this year, as Bitcoin prices have correlated with the Nasdaq, as CNBC reported, challenging earlier assumptions that Bitcoin would serve as a hedge against inflation.

If wild fluctuations like these make you nervous, you might want to avoid Bitcoin. Otherwise, these fluctuations shouldn't worry you too much as long as you keep in mind that cryptocurrencies can be a smart long-term investment.

Another reason to reconsider investing in Bitcoin is the price. Since a single Bitcoin costs almost $20,000, most people cannot afford to buy whole Bitcoins. For investors who want to avoid buying a fraction of a Bitcoin, this is a disadvantage.

2. Ethereum (ETH)

Ethereum is a network that allows developers to create their own cryptocurrency and develop smart contracts using the network. Although Ethereum is far behind Bitcoin in value, it's also far ahead of its other competitors.

Although it entered the market years after some other cryptocurrencies, it's far surpassed its place in the market due to its unique technology. It's currently the most popular blockchain and the second largest cryptocurrency after bitcoin.

It'll gain even more ground once an upgrade nicknamed "The Merge" is fully implemented. The upgrade, scheduled for the third or fourth quarter of 2022, will move Ethereum to proof-of-stake-based consensus, reducing the number of coins and making mining obsolete.

The merge is also expected to drastically reduce Ethereum's energy consumption. Prices of ETH rose nearly 50% in the last two weeks of July in anticipation of the upgrade, Fortune reported, but have fallen since the originally expected August launch date passed.Although Ether doesn't have the widespread adoption of bitcoin, traditional companies are coming on board. Fidelity, for example, is ramping up its technical staff to create the infrastructure needed to offer Ethereum custody and trading services to its clients, the Wall Street Journal reported.

Risks of investing in Ethereum

While the Ethereum platform uses blockchain technology, it currently only has one "lane" for conducting transactions. This can cause transactions to take longer to complete if the network is congested. Transaction fees are also high.

The blockchain's "gas" price - the amount of Ether needed to complete a transaction on the Ethereum blockchain - rose 13% in March due to high demand for blockspace, CoinDesk reports. Although The Merge will solve these problems, some have grown tired of waiting. Cryptocurrency derivatives exchange Dydx, for example, is moving to its own blockchain.

Security has also been an issue. In 2016, for example, a hack that exploited a security vulnerability resulted in the loss of more than $50 million worth of Ether. And in May, there was a security issue on the network after a new blockchain was introduced that runs alongside the Ethereum mainnet. However, this blockchain is on a test network, so users weren't affected. The latest merge upgrade is expected to make the blockchain more secure.

3.rd Binance Coin (BNB).

After years of relatively low prices, at least compared to other cryptocurrencies, Binance Coin took off in early 2021, rising from around $38 on January 1 of that year to an all-time high of $683 in May.

Due to its performance over time, binance coin has proven to be one of the more stable investment options - relatively speaking. It's the native token on Binance, which is the largest cryptocurrency exchange in the world, according to CoinMarketCap - and on Binance.US, the version that U.S. citizens must use. But despite its extensive functionality and the success of the coin in Binance sub-projects, Binance Coin is still a very volatile investment.

Investors who trade frequently should note that Binance recently briefly paused deposits and withdrawals for some networks, including Polygon and Solana, while it underwent upgrades. A more recent one, on April 8, didn't affect airdrops - rewards based on a percentage of users' deposited amounts.

Risks of investing in Binance Coin

Although Binance Coin's position as a native cryptocurrency on the world's largest exchange "legitimizes" it in some ways, it also makes the currency particularly vulnerable to regulatory issues. BNB lost 7.3% of its value in June when it was revealed that the U.S. Securities and Exchange Commission was investigating whether Binance had followed proper procedures in its 2017 IPO, Fortune reported.

4. Cardano (ADA)

The Cardano network has a smaller footprint, which is attractive to investors for several reasons. It takes less energy to complete a transaction on Cardano than on a larger network like Bitcoin. This means transactions are faster and cheaper.

Last year, Cardano introduced a "hard fork," an upgrade that increased functionality - in this case, the ability to use smart contracts. Another hard fork, in this case Vasil, has been delayed until June 29, likely September, but once launched it should improve the scalability of the Cardano blockchain, The Daily Hodl reports.

Cardano recently launched a test version of a platform called AdaSwap, which allows developers to build decentralized financial apps. AdaSwap could elevate Cardano's status as a Web3 network and drive up the price of the coin.

Risks of investing in Cardano.

Even with a better network and the advanced features that smart contracts offer, Cardano may not be able to compete with larger cryptocurrencies. Fewer adopters means fewer developers. This isn't attractive to most investors who want to see a high adoption rate.

The platform has big plans, such as creating an incubator to help Africa realize its potential as a major economic power, but it remains to be seen if it can live up to that potential.

Advice

Don't be discouraged by market fluctuations. Don't get rattled by the daily changes, but look at the big picture.

5. polygon (MATIC)

Polygon was created by a development team that was instrumental in the Ethereum blockchain platform. As a "layer two" solution, it extends Ethereum into a multi-chain system and improves transaction and verification speed.

Polygon is supported by cryptocurrency exchanges Binance and Coinbase.

On July 20, Polygon announced in a press release that it's launched Polygon zkEVM, "the first Ethereum-equivalent scaling solution that works seamlessly with all existing smart contracts, developer tools and wallets." It does this with a type of cryptography called zero-knowledge proofs, which lower transaction costs and increase throughput.

Polygon currently hosts 19,000 decentralized applications, including some from companies such as Meta and Stripe - a 600% increase since last October, according to a post on Polygon's blog. In addition, Polygon supports the Tether stablecoin, which could contribute to the network's future growth. Another plus is its investment in carbon neutrality, which has led to recent price increases.

Risks of investing in Polygon

Late last year, Polygon announced that it had patched a security vulnerability that put about $20 million worth of coins at risk, CoinDesk reported. A hacker discovered the vulnerability and notified Polygon, which made a fix within two days. However, Black Hat hackers had already stolen more than 800,000 tokens, leaving Polygon owed about $1.4 million.

6. Terra 2.0 (LUNA)

The Terra Classic blockchain used stablecoins - coins tied to fiat currencies such as the U.S. dollar, the South Korean won and the International Monetary Fund's Special Drawing Rights - to power global payment systems, according to CoinMarketCap. Its native coin, now using the symbol LUNC, stabilized the prices of blockchain stablecoins.

However, terra crashed and burned in early May, triggered by stablecoin volatility and general turmoil in cryptocurrency markets, ending cryptocurrency's strong year and pushing some crypto platforms into bankruptcy.

After the crash, Terra renamed the original network Terra Classic (LUNC) and launched Terra 2.0 (LUNA), a new blockchain without an algorithmic stablecoin, in an effort to stabilize the Terra ecosystem and help investors who lost money recover some of their investments. LUNC coins are traded separately from the LUNA coins that come with Terra 2.0.

Risks of investing in Terra 2.0

The launch of Terra 2.0 was a controversial move, and industry observers are undecided about its long-term viability. Nevertheless, several new projects have already been launched on the new network, and the native coin may be of interest to you if you have a high tolerance for risk.

Good to know

LUNC is not the first failed stablecoin from Terraform Labs CEO Do Kwon. Basis Cash, a coin he launched on Ethereum in 2020, never reached parity with the U.S. dollar, CoinDesk

reported. Its price was $0.004747 on Sept. 1.

7. Avalanche (AVAX).

Avalanche is a relatively new "layer one" blockchain - a blockchain that improves the base protocol to make the system more scalable, as Binance describes it. It was founded as an Ethereum competitor by Ava Labs and computer scientists at Cornell College, one of whom, former professor Emin Guen Sirer, is a veteran in cryptography research, according to CoinMarketCap.

While Ethereum requires all nodes to confirm each transaction, Avalanche's three individual blockchains can verify transactions independently. This makes Avalanche more scalable and better able to process large volumes of transactions - up to 6,500 per second. As a result, it is becoming increasingly popular among Ethereum projects, U.S. News reports.

As for the coin itself, Bloomberg reported April 7 that Avalanche has supplanted ether as Terra's reserve currency for its own UST stablecoin. Luna Foundation Guard, the nonprofit that supports Terra, intended to acquire $100 million worth of Avalanche as part of that initiative.

Its price has fluctuated over the past year from a low of $13.79 to a high of $146.22. As of Sept. 1, the coin is trading for $18.59.

Risks of investing in Avalanche

Sirer introduced the cryptocurrency in a whitepaper in 2018. It was launched in 2020. With such a short history, Avalanche does not have a comparable track record, making it a riskier investment for potential buyers.

8. Chainlink (LINK)

Chainlink uses a decentralized oracle network to enable secure interactions between blockchains and external data feeds, events, and payment methods that developers hope will allow smart contracts to become the dominant form of digital payment, according to CoinMarketCap.

One thing in Chainlink's favor is a strategic partnership with Google, under which Google will use the Chainlink protocol to connect users to its cloud services, Benzinga reported. Advisors to the project include former Alphabet chairman Eric Schmidt, DocuSign co-founder Tom Gonser and former LinkedIn CEO Jeff Weiner, according to Securities.io.

Chainlink is also the choice for decentralized finance company Truflation's new inflation index, which will serve as an alternative to the Consumer Price Index. While the CPI measures inflation using survey data, Truflation's index uses price data with the CPI calculation model , CoinDesk reports. The Truflation index is said to be more accurate, transparent and resistant to censorship than the CPI.

Risks of investing in Chainlink

Despite its proven benefits and support from major players, Chainlink has experienced the same kind of volatility as other cryptocurrencies. Its price fell from around $20 on Jan. 1 to $6.56 on Sept. 1. It also has some emerging competitors, such as NEST, which is based on Ethereum's ERC-20 token and has been added to the platform by Coinbase under the label " experimental," as The Daily Hodl reports.

Advice

Don't decide to invest in any number of cryptocurrencies without further researching the market. A new cryptocurrency network could easily climb the ranks and prove to be a leader over other platforms. The smartest thing you can do as an investor is to keep yourself updated on what's happening in the market.

Evaluating the best cryptocurrencies

If you do a quick online search, you'll find dozens of recommendations for investing in cryptocurrencies. The following factors were taken into account when selecting the eight best recommendations.

Longevity

How long has cryptocurrency been around? New cryptocurrencies are not immediately ruled out, but having historical data to compare them to helps you see how a company has performed so far.

Track record

How has the company performed over the years of its existence? If you see stable prices, that's a good sign. If you see cryptocurrency gaining traction and becoming more valuable over time, that's even better.

Good to know

Things can change at any time, and an investment can perform better or worse than it did in the past.

Technology

How does the platform compare to others in terms of ease of use and security? The first thing you should look for is the speed at which transactions are made. The network should be able to handle transaction traffic effortlessly.