For crypto newcomers considering which digital asset to buy first, there are three names you may hear: bitcoin, ether and solana, three of the top 10 cryptos by market average. These tokens are available on almost all major exchanges, making them accessible to investors of any level.
However, each of these coins has a unique design philosophy and is meant to be used for a specific purpose. Bitcoin accounts for more than half of the entire crypto market, serving primarily as a store of value. Ether is the native cryptocurrency of ethereum, the leading blockchain for organizing decentralized applications (dApps), decentralized finance (DeFi) and virtual tokens (NFTs) through smart contracts. And solana is designed for high-speed, low-cost transactions.
That difference can make the decision of which crypto to invest in difficult for first-time buyers. Read on for what you should know before investing in these digital assets.
Bitcoin, ether and solana: How cryptos differ
Bitcoin (BTC) is the oldest and most well-known of the three cryptos. Launched in 2009, it was designed to function as a digital currency that could operate without a bank or government intermediary.
Over time, the primary use of coin has shifted from a method of transferring value to a method of storing it. Many people hold bitcoin the same way they would hold gold: as a long-term asset that they expect to hold or grow in value. Simplicity is part of its appeal.
Ethereum (ETH) was launched in 2015 and its native token, ether, is the second largest cryptocurrency by market capitalization. It expands the vision of a programmable blockchain where developers can embed code directly into assets. This allows the network to use smart contracts, a type of agreement that automatically activates when predetermined conditions are met, such as when a payment is completed or a shipment is delivered.
The smart contract system is key to ethereum’s versatility and has made it the foundation of the broader crypto ecosystem, including Web3 applications and stablecoins. It is more complex than bitcoin, and its price reflects many variables such as the competition of similar coins and providing shocks from crypto staking, but it is also a window into what blockchain technology can really do.
Solana (SOL) features transaction speeds and fees that make it work for high-volume applications. Since its launch in 2020, it has built a large ecosystem of its own, especially in NFTs and consumer-facing applications. But its network has experienced significant outages and the coin has shown higher volatility than any of its older peers.
What to consider before choosing between cryptos
There are a few important questions to ask yourself before buying any popular crypto.
What is your time horizon? If you plan to hold on to your crypto for years rather than months, remember bitcoin and ether’s history of recovery after major disruptions. Solana has a short record simply because there is little data to draw from. But remember, past performance does not guarantee future returns, and crypto has proven to be a very volatile asset.
How much volatility can you handle? BTC, ETH and SOL are all volatile by conventional investment standards. But they are not consistent all the same. Bitcoin tends to be the most stable of the three. Ether is very thin and solana is prone to extreme fluctuations in both directions. But if watching your balance drop by double digits in a week is going to lead to panic selling, you might want to reconsider crypto altogether.
Do you want to use crypto, or just hold it? If what you are looking for is exposure to crypto as an asset class, bitcoin may be the right call. Some people use it for payments if possible, but the coin is reserved for its long-term benefits. If the broader crypto ecosystem is what interests you, consider ether or solana instead, as they help facilitate an interconnected network of digital assets by lending, borrowing, trading on decentralized exchanges and creating NFTs.
What makes sense for new crypto investors
Many new investors start with bitcoin as it is the most established cryptocurrency, making it easy to buy, sell and trade. It also has an easy to use case and its performance shows an upward trend over time despite fluctuations.
Ether can be the second step of nature. If you’ve bought bitcoin and want to explore what the crypto ecosystem is actually doing, ethereum – and the ether token – can be a gateway to more of that activity. This is also where the biggest developments in the space are still concentrated.
Solana can make sense for buyers who understand what they are doing: a small network with high potential, but also high risk. It’s not an obvious default on first purchase, but it’s a sensible addition once you’ve considered the trade-in. After all, it is still one of the largest coins in the market by market cap.
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