Seemingly out of nowhere, 2023 has turned into a banner year for the crypto market. It's not just Bitcoin, either. Bitcoin's 125% gain has propelled the entire market higher, with a growing number of crypto tokens now up triple digits for the year.
Three of these tokens are Avalanche (AVAX 3.17%), Chainlink (LINK 2.05%), and Lido DAO (LDO -0.03%). All three have market capitalizations north of $2 billion, are up more than 100% for the year, and are currently trading for less than $25. Let's take a closer look at each.
Avalanche
First up is Avalanche, which is up 144% over the past 30 days and 108% year to date. Avalanche, much like Ethereum (ETH 2.02%) and Solana (SOL 5.48%), is a Layer 1 blockchain network. What this means in simple terms is that it's the base layer (i.e. the Layer 1) for just about everything important that happens in the blockchain world, including non-fungible tokens (NFTs), decentralized finance (DeFi), the metaverse, and gaming.
There's a lot to like about Avalanche's growth prospects, which were bolstered by a partnership deal with the cloud computing unit of Amazon in January. The hope at the beginning of the year was that Avalanche would eventually sell blockchain services to enterprises and large government clients, much like Amazon Web Services sells cloud computing services.
But what really seems to have jump-started Avalanche's rapid ascent is the breathtaking performance of Solana, which has gone absolutely stratospheric this year. Solana is up an eye-popping 500% in 2023, and it now looks like investors are trying to capture some of this performance by piling into Avalanche, which is arguably Solana's closest rival.
Chainlink
Next up is Chainlink, which is up 98% over the past 30 days and 170% year to date. Chainlink is a decentralized blockchain oracle network, which means that it provides real-time data to smart contracts running on the blockchain. These smart contracts, which are tiny bits of executable computer code, require data as inputs. When they can't find this data on their native blockchains, they need to turn to a third party like Chainlink.
There's a strong story to be told about Chainlink and the brave new world of blockchain data, especially when it comes to decentralized finance and the need for real-time financial data. During the last crypto bull market rally, the thinking was that decentralized finance would eventually replace traditional finance (i.e. the world of banks and financial intermediaries), and that would imply a huge role for smart contracts. But now there's a new twist on this story involving artificial intelligence (AI).
In May, Chainlink started to develop a new strategy based around the integration of blockchain technology and artificial intelligence. Given the nearly limitless upside potential of AI, it's easy to see why this could be a very compelling growth strategy.
While Chainlink is not an "AI token," it could be an indirect play on the AI boom. It's up to you to decide whether Chainlink's strategy is just an attempt to capitalize on the newfound popularity of ChatGPT and all things AI or whether this strategy has legs.
Image source: Getty Images.
Lido DAO
Finally, there's Lido DAO, which is up 65% over the past 30 days and 163% for the year. Lido DAO is a third-party staking platform for Ethereum. Its position as a key player in the world of crypto staking is what makes it so valuable.
Staking is a way of "locking up" your crypto for financial rewards, and Lido DAO appears to be capitalizing on the newfound popularity of staking Ethereum as a form of passive income. Basically, if you are looking to generate a 3%-4% APR on your Ethereum tokens, you can do so with Lido DAO.
In many ways, Lido DAO is a play on the future growth and stability of the Ethereum blockchain. If you think that Ethereum will continue to maintain its dominant market position and that staking will remain popular, then Lido DAO could be a great way to participate in any future upside.
Be aware, however, that Lido DAO doesn't have a monopoly when it comes to its unique form of staking (known as "liquid staking"). There's always a risk that a competitor could come along and chip away at Lido DAO's market lead.
The best crypto for the long haul
Of these crypto tokens, which is the best long-term investment? If you had asked me that question 12 months ago, I would have said Avalanche. At the time, ChatGPT hadn't been launched and the AI boom hadn't started, and crypto staking was a niche activity, at best. By contrast, Avalanche was an "Ethereum killer" and seemed poised for a big comeback this year after a disastrous 2022 when it lost more than 90% of its value.
But now, 12 months later, I'm leaning toward Chainlink as the best long-term investment. Investing in Chainlink could be a long-term play on the importance of data in the blockchain world and the growth of decentralized finance.
In a best-case scenario, Chainlink might find a new strategic application for AI that could boost its valuation significantly. If you're not risk-averse and willing to let this story play out over the course of years (and not months), this crypto might just turn out to be a fantastic long-term investment.
