With so many exciting cryptocurrency projects out there, it’s easy to focus only on new or undiscovered coins. But we shouldn’t forget the old favorites. And August is an important month for the crypto colossus that is Ethereum (ETH), which is why it’s top of my list of coins to follow this month.
On the subject of bigger coins, August might be a good month to take stock and make sure your crypto portfolio is balanced. Ideally, your crypto investments should represent 5% to 10% of your total investments. Within that, aim to have the majority of your crypto assets (60% or more) in safer, more established coins such as Bitcoin (BTC), Ethereum, and maybe Cardano (ADA).
If you want to diversify and explore smaller coins, you may well see higher returns, but you’re also taking bigger risks. Cryptocurrency is already risky and many coins will fail, so it makes sense to weigh your investments accordingly.
Here are three altcoins to watch in August.
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1. Ethereum and its hard fork
Ethereum will launch a long-awaited and somewhat controversial hard fork, also called the London upgrade, on August 4. A hard fork is a significant change to a network’s programming that makes older versions obsolete.
The London upgrade is not to be confused with the major Eth2 upgrade that’s being carried out in stages and aims to solve some of the coin’s scalability and sustainability problems. Ethereum’s co-founder and creator, Vitalik Buterin, recently said the full Eth2 rollout may not be completed until 2022.
Nonetheless, the hard fork is important. Without getting technical, the hope is that the changes will reduce the quantity of Ethereum on the market, improve transaction times, and stabilize fees, according to Coindesk. Transaction fees on Ethereum change depending on how busy the network is, and high fees have driven some developers toward other cryptos.
However, there are some risks. The changes will reduce the fees miners receive, which may disincentivize Ethereum miners. This, in turn, could increase transaction times and pose a security risk. Plus, any major upgrade brings the risk of technical glitches and issues.
If there are issues, it could spook the whole alt coin market. Especially as so many coins are built on Ethereum’s platform. With so much at stake, all eyes will be on Ethereum in August.
2. Algorand (ALGO)
Knowing that Ethereum won’t fully upgrade to Eth2 until at least next year puts other programmable blockchains into the spotlight. There are several interesting cryptocurrencies in this space, but one we haven’t talked about before is Algorand. It’s faster, cheaper, and more environmentally friendly than Ethereum. The average transaction cost is a fraction of a cent.
According to its website, Algorand can process 1,000 transactions per second (TPS) right now and expects to increase to 46,000 later this year. To put that in context, Ethereum currently processes around 15 TPS and might be able to reach 100,000 TPS when Eth2 eventually launches.
Built by MIT professor and Turing Award winner Silvio Micali, Algorand has several things in common with Cardano. Its team is made up of academics and business leaders and it has developed its own proof-of-stake blockchain. Proof-of-stake is a more environmentally friendly way of keeping the network secure — and as an investor, it means you can earn staking rewards.
However, unlike Cardano, Algorand already has its smart contract capability up and running. Cardano is expected to launch these in September. Smart contracts are tiny pieces of code that live on the blockchain and make it programmable. It means developers can build applications and new cryptocurrencies.
3. Enjin (ENJ)
With all the recent excitement about Axie Infinity (AXS) and its huge price jumps, it feels like a good time to pay attention to other gaming and non-fungible token (NFT) cryptos. NFTs are a type of digital collectible, and Enjin users can build them, own them, and play with them.
For example, earlier this year, Enjin partnered with Microsoft and the popular video game Minecraft to create unique NFT heroes that players could use in the game.
Another interesting aspect of Enjin is its commitment to sustainability. It’s already signed up to the Crypto Climate Accord and plans to launch carbon neutral NFTs by 2030. In July, it announced it was the first NFT company to join the United Nations Global Compact — the world’s largest corporate sustainability initiative. The environmental cost of Bitcoin continues to be an issue for many investors and NFT creators, so eco-friendly cryptos are worth a look.
Gaming is a promising blockchain sector, particularly because of the potential for players to own NFTs as in-game assets. Before, if a player bought something in a game, it would only belong to them in the game. The magic of NFTs is that players own them — and can trade them — in the real world too.
However, gaming can be unpredictable and subject to trends. And blockchain’s relatively slow transaction speed has so far held it back when it comes to running complex games.
Do your own research
This monthly altcoins to watch column aims to give you a taste of interesting cryptocurrencies and what’s happening in crypto land. I focus on what I’d call “good-faith” coins — ones that have a clear purpose and a team behind them. But it is a rapidly evolving industry, and we don’t yet know how it will unfold.
All the coins listed are available from major U.S. cryptocurrency exchanges. But before you buy, it is important to do your own research. Only you know your interests, risk tolerance, and financial situation. And only you can decide which coins to add to your crypto collection.