The Best Crypto Investment Strategies For 2022

Crypto 2022

Some of the crypto winners of 2021 saw mind-blowing returns of over 10,000%. Solana gained 18,000%, Dogecoin 10,000%. Even Cardono’s 1300% gain and Ethereum’s 400% are impressive by any standards. As 2021 draws to a close, the questions on the minds of crypto investors everywhere are ‘which coins will rise in 2022?’ and ‘what crypto investment strategies can I use to maximize gains?’

Everyone knows, or at least they should, that past performance is not always a reliable indicator of future results, and with over 500 coins available on a typical crypto exchange like Binance, picking the next crypto winners of 2022 is not a straightforward task. In fact, since 2013, only 40% of newly listed coins have gained in value, with the remaining 60% losing value or merely breaking even. Clearly, throwing money into random coins and hoping for the best is not a sound investment strategy.

Of the 40% of cryptos that have gained in value since 2013, only 2% earned enough to push returns above a plain Jane index fund, tracking the S&P 500. So, is there a way to analyze past data and determine a relatively ‘safe’ investment strategy for 2022 that will maximize returns? Can current crypto rankings be used to predict the best cryptocurrencies to invest in for 2022?

Diligent Reddit user milonuttigrain has crunched the numbers so you don’t have to. A full analysis of the top 200 crypto coins by market cap in Jan 2020 was completed to determine the best and worst performers. The patterns and trends and can be applied to future investment strategies.

Surprisingly, 60% (120) of the top 200 coins in Jan 2020, had fallen off the top 200 list by Nov 2021, with almost all the coins in the second half of the top 200 now out of the ranking. Focusing in on the top 50 coins in Jan 2020 reveals that that 82% are still in the top 200 list today. Evidence that out of the top 200 coins, the top 50 have been much more stable than the remaining 150.

Focusing in even further on the top 20 coins by market cap in Jan 2020, shows that 45% remain in the top 20 and 75% are still in the top 50 today. All the remaining coins from the top 20 in Jan 2020 are still in the top 100 today, except for one. An altcoin called 999, number 19 on the list in Jan 2020, turned out to be a pump-n-dump rug pull scam and ended up being worth nothing.

The vast majority of investors seeking meteoric gains in excess of 10,000% since Jan 2021, spurred on by headlines about the latest crypto investor to turn $1000 into a multimillion-dollar fortune, will have been sorely disappointed. In fact, only 5 of the top 200 coins by market cap in Jan 2020 (Dogecoin, Terra, Matic, Loopring and Fantom) had risen over 10,000% by Nov 2021. On the flipside, 36 of coins in the top 200 (18%) experienced extreme losses of between 90 – 100%. Proving that trying to pick a single winner from the top 200 is a gamble.

So too is investing in a winner from a previous year. For example, the biggest winner of 2017, Ripple, saw whopping gains of 36,000%, dwarfing Bitcoin’s rise of 1300% and Ethereum’s rise of almost 9,000%. However, an investor getting in on the Ripple action in Jan 2018 would have been late to the party and lost 57% over the past four years. Clearly, trying to pick individual winners or backing previous winners are strategies best avoided.

Encouragingly, an equally weighted investment in the top 200 coins in Jan 2020 would have fared much better, resulting in a 1200% gain by Nov 2021. This absolutely nothing to be sneezed at, and crypto investors who diversified into the top 200 would probably be over the moon, especially considering the S&P 500 only returned 31% over the same period. However, an equally weighted investment in just the top two heavyweights, Bitcoin and Ethereum, would have yielded a return of almost 2150% over the same period, showing that diversification is not always the best option.

Similarly, an equally weighted investment in the top 200 coins by market cap in Jan 2018, would also have performed well, rising 652% in almost four years. While this sounds great, 80% of the coins in the top 200 lost an average of 50%. Furthermore, removing just one coin from this list, Binance Coin, would have resulted in an overall loss of 18%, showing the volatility and risk associated with investing equally in the top 200. Since 2018, the total crypto market cap has increased ten-fold, from $231 billion to $2.6 trillion. Ethereum and some other meme coins have managed to gain some of the market share. However, the dominance of Bitcoin has remained largely unchanged. Over the past four years, the top few coins by market cap have done most of the heavy lifting and any future investment strategy should probably focus largely on the current top coins.

The writer of has done just that. As an experiment, $100 was invested in each of the top 10 cryptocurrencies by market cap (an annual investment of $1000) each year on Jan 1 for the past four years. The results from Jan 1 to Dec 31 each year are as follows:

  • 2018: $1000 reduced to $150, a loss of 85%
  • 2019:  $1000 increased to $1017.37, a gain of 1.74%
  • 2020: $1000 increased to $2395, a gain of 139.5%
  • 2021 (up to Oct): $1000 increased to $4,987, a gain of 399%

All the previous years’ investments were held, with no selling or trading. The average return of each years’ portfolio has been around 514%. This is very impressive, especially when compared to the S&P 500 which has returned a cumulative 56% over the same time period.

So what does all this mean and how can we use it to develop a winning crypto investment for 2022? It means that any sensible crypto investment strategy for 2022 and beyond should largely focus on the top 10 coins by market cap.

When the data is analyzed two sensible and simple strategies to choose from emerge:

Strategy 1

In 2022, buy and hold equal amounts of Bitcoin and Ethereum. The data shows that historically the biggest returns from the top 200 coins have come from the top two. Throughout the last four years, a consistent weekly amount invested 50:50 in Bitcoin and Ethereum would have produced returns of 523% and 1400% respectively.

Strategy 2

In 2022, buy and hold and equal amount of the top 10 coins by market cap. If investing on a regular basis, buy equal amounts of the top 10 coins by market cap at the time of investing.  The current top 10 coins are listed here. This easy strategy avoids overthinking, rash decision making, and taking gambles on the latest and greatest meme coins fueled by media hype and influenced by the whimsical tweets of billionaires. However, this strategy is higher risk that strategy 1 above. Due to the dominance of Bitcoin, investing equally in the top 10 means you still are investing in relatively smaller cryptos and potentially being rewarded for that extra risk.

As outlined in the Market Sentiment blog, this strategy applied from 2013 has produced consistent positive returns in excess of overall stock market returns. However, just like the stock market, the crypto market is not immune to significant peaks and troughs in any given year. In 2018, as mentioned above, this strategy would have results in a loss of 85%. Anyone not prepared for the inevitable peaks and troughs of the market should not be investing to begin with. That’s why a longer term buy and hold strategy is suggested for highest likelihood of consistent positive returns.