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In the crypto market, all eyes are on Bitcoin (BTC -0.25%), the world's largest cryptocurrency by market capitalization. At one point, Bitcoin was up more than 80% for the year, as it soared to a price of $30,000. However, Bitcoin has started to pull back in recent days and is now up only 3% over the past 30 days.

At the same time, a number of cryptos are keeping pace with Bitcoin's overall performance. For example, Ethereum (ETH -1.05%) is up more than 63% for the year and 10% over the past 30 days.And both Avalanche (AVAX 1.48%) and Cardano (ADA -0.57%) are up more than 64% for the year.Here's a closer look at why these three cryptos could be ready to soar higher than Bitcoin.

All three of these cryptos are premier Layer 1 blockchains. You can think of these blockchains as the "building blocks" of the crypto industry. Once you have a Layer 1 blockchain like Ethereum, you can start to build on top of it. That means enjoying things like non-fungible tokens (NFTs), smart contracts, decentralized finance (DeFi), blockchain gaming, and web3 decentralized applications.

Importantly, these are all innovations the Bitcoin blockchain was not designed to offer. Bitcoin is, first and foremost, a potential store of value, similar to gold. Satoshi Nakamoto, the anonymous creator of Bitcoin, also designed it to be a peer-to-peer electronic cash system.But beyond that, Bitcoin does not offer nearly the functionality and diversification that you find with the big Layer 1 blockchain networks. If you want to get involved in the world of decentralized finance (DeFi), for example, you go to a blockchain like Ethereum.

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As a result, one powerful investment thesis right now involves Layer 1 blockchains. All three of these Layer 1 blockchains -- Ethereum, Cardano, and Avalanche -- are highly diversified, and all of them rank as Top 15 cryptocurrencies by market capitalization. In terms of market cap, Ethereum trails only Bitcoin. Cardano, which launched back in 2017, now ranks as the No. 7 crypto in terms of market cap.

Of these three, Avalanche (No. 15 in terms of market cap) may be the least-known among casual investors. However, during the last crypto bull market rally, Avalanche was routinely discussed as a potential "Ethereum killer" and comes with a solid pedigree. And in January 2023, Avalanche signed an important partnership deal with Amazon Web Services to offer blockchain services to large corporate and government clients.

However, not all Layer 1 blockchains are seeing the same type of performance as Ethereum, Cardano, and Avalanche. For example, if you look at the next tier of smaller Layer 1 blockchains, many of them are actually struggling right now. For example, Aptos (CRYPTO: APT) is down 9% over the past 30 days, and Algorand (CRYPTO: ALGO) is down 11%.

The big factor here appears to be an overall flight to quality by investors. While sentiment has turned markedly bullish for crypto in 2023, there is still a realization that we're not out of the woods yet. Case in point: Bitcoin seemed to be unstoppable for the first three months of the year but now is struggling to soar past $30,000.

As a result, investors are still searching out high-quality names. This generally means a focus on cryptos with huge market caps and the biggest blockchain ecosystems. This explains why some Layer 1 blockchains are doing so well while others are not.

In choosing between top Layer 1 blockchains, the obvious choice would be Ethereum. This crypto, just like Bitcoin, is a favorite of institutional investors. It has a huge market cap, a well-diversified ecosystem, and a huge developer base. Ethereum also ranks No. 1 in terms of NFT trading volume and No. 1 in terms of Total Value Locked (TVL), which is a key metric for determining how much activity is actually taking place on a blockchain. Moreover, in late 2022, Ethereum completed a highly successful technological transformation -- known as The Merge -- that sets the stage for strong long-term growth.

However, if you're looking for a dark horse candidate that might end up outperforming Ethereum over the long run, it's Cardano. This crypto, which has never traded higher than $3.10, is en fuego this year. It's up 64% for the year, which is keeping pace with both Ethereum and Bitcoin. And it has a new strategy based around DeFi that is going gangbusters. The latest first-quarter 2023 metrics for Cardano are now in, and all signals are flashing green.

Now is the time to invest in high-quality Layer 1 blockchains that have diverse blockchain ecosystems and solid long-term growth prospects. The three names on my list right now are Ethereum, Cardano, and Avalanche.

Read more here:

3 Top Cryptos That Could Soar Higher Than Bitcoin - The Motley Fool