Back in 2017, Bitcoin was one of the most popular cryptocurrencies for investments, gaining 1,300% that year. Still, others outperformed Bitcoin, such as Ripple, with a 36,000% gain. Since that happened, crypto enthusiasts have been looking to find the next best cryptocurrency possible. If you are looking for the best cryptocurrency to invest in, you are sure to find the answers here.
What Is Cryptocurrency?
In 2009, Bitcoin was the first cryptocurrency developed by Satoshi Nakamoto. No one knows who this person is because it was a pseudonym. Still, this person’s groundwork for inventing Bitcoin helped pave the way for other cryptocurrencies.
With that said, more people have accepted crypto as an investment option, medium of exchange, and a way to transfer money securely and digitally from one owner to another without having to use financial institutions or banks.
A cryptocurrency is designed to act as money or an alternative to the traditional fiat currencies of the nations. Many currencies are eroding because of inflation or at risk of a government seizure. For example, Greece has a 45% income tax rate and seizes about 900 bank accounts each day.
Benefits of Cryptocurrency
Before you can decide the best cryptocurrency to invest in, you need to know why it’s beneficial to invest in crypto at all. These can include:
Cryptocurrency owners use unique wallets to access the currency and can receive/send funds from particular wallet addresses that feature a special key for access. You can also use an exchange on which to store your currency, though this comes with extra risk. Regardless, the currency has a record on the blockchain, so a copy is stored at every node. Your computer keeps a ledger, but it also syncs with other computers online.
Therefore, your money isn’t in a bank at all. This decentralized nature means that cryptocurrencies are less vulnerable to localized attacks like hardware failures and fires, as well as seizure. Your data is stored off-site, but it’s also copied to a variety of nodes worldwide.
Most cryptocurrencies are focused on privacy, so they obscure the receiver’s and sender’s identity. Cash is the only other form of currency that offers such anonymity.
Bitcoin has a fixed supply, and there is about 17 million Bitcoin out there. Still, only 21 million Bitcoin could ever exist because that code is built into the currency. That fixed supply offers similar characteristics to silver, gold, and other precious metals that have been used as money throughout history.
Once all Bitcoin are in circulation, the supply can’t grow anymore, which devalues the buying power of that currency.
Cost of Transfer
The costs associated with transferring cryptocurrency could be considered a pro and con, depending on the transfer type, currency, and speed to complete the transfer. For example, Bitcoin can get quite expensive if you have to clear a transaction quickly. If your deals aren’t time-sensitive, costs are lower.
Ripple, another up-and-coming crypto, is faster and less expensive to transfer, so many financial institutions are choosing Ripple-based transactions.
Some cryptocurrency options allow for smart contracts, which are programs on the blockchain that are used to manage transactions and other things. Ethereum offers this feature. In a sense, they can replace escrow services and arbiters. A smart contract looks at the transaction’s details, releasing the payment only when specific conditions are met.
Disadvantages of Cryptocurrency
While cryptocurrencies are highly beneficial, there are some drawbacks of which you should be aware. For one, awareness of crypto is growing, but most people focus on Bitcoin. Therefore, very few retailers accept crypto as payment, but the market is growing and expanding.
Many projects are abandoned early on, which means you may invest in something that is, essentially, worthless.
Cryptocurrencies aren’t regulated at the federal level in the US, so states can choose what regulations and rules pertain to crypto or the blockchain, which serves as the backbone. Still, many investors worry that future regulations could eliminate or cause a drop in demand.
What to Consider for Cryptocurrency Investment
If you are looking for the best cryptocurrency to invest in, there are a few things to consider. They include:
- Adoption Rate: When a new crypto becomes available, there can be significant gains for newly introduced coins. Still, you should look at the adoption rate and focus most of your investments on crypto that is used in real-world transactions.
- Market Cap: The highest amount you can invest or take away is important. If the crypto is fledgling, it might not find the market at all, so you can’t exit the deal profitably.
- New Technology: Ripple and Ethereum owe their gain to the technology that was built into their platforms. Therefore, these cryptocurrencies stood apart in the crowded market of similar offerings.
- Industry Utility: Again, Ripple and Ethereum are great examples of cryptocurrencies that have utility beyond the exchange medium. Ripple agreed to be used within the financial industry to help transfer money throughout the world quickly and inexpensively.
- Anonymity and Security Features: Technology, such as the smart contract found in Ethereum and others, can make your transactions more secure because each one has a set of rules in place. Other cryptocurrencies, including Monero, focus on anonymity, choosing to obscure the identity of the receiver and the sender of the funds.
When you are choosing to invest in a cryptocurrency, you likely hope that it is going to be available for monetary trade at some point. You can check out a few things now to show that it might not be the right investment opportunity for you.
- Limited Interest: Within the cryptocurrency market, there are some well-known heroes. Of course, there have been plenty of duds, as well. These include well-intentioned crypto options that were poorly supported, never got off the ground, or were more hobby than currency. Stick to currencies that have shown the signs for continued market interest to be on the safe side.
- Redundancy: Most cryptocurrencies are built using open-source code, so it is quite easy to clone existing crypto. This means minor changes are necessary to update the features and codes. However, new currencies might not offer unique benefits to help justify your investment, and the currency might not be adopted by the majority.
- Limited Support on the Exchange: If there is little support on the exchange for a cryptocurrency, it can make it much harder to trade. You may need to take several steps or deal with conversions in one trade. Options with more support make it easier to exit or build your position.
- Low Market Cap: Just like a market cap helps you distinguish between penny stocks and those on the Dow Jones, higher market caps for cryptocurrencies show more liquidity and a vibrant market. Lower caps and thinly-traded options might be a trap and could be nearly impossible to escape.
While daring investors can choose to buy up new cryptocurrencies when they first pop up, there might never be a ‘next big crypto’ in the works. Plus, there have been almost 1,000 cryptocurrencies that vanished for those early investors. Therefore, when choosing the best cryptocurrency to invest in, we looked at these things:
- Large market caps on established cryptocurrencies
- Promising technology
- Recent trends and historic performance
- Cryptocurrencies being traded on multiple exchanges (more liquidity)
The Best Cryptocurrencies Currently
Of course, you can’t go wrong with a classic. As Bitcoin was the first and is always going to be the best-known crypto on the market, it’s a great option for those who are starting out or want something they know is established. Plus, it has one of the largest market caps possible and is traded more than other options. Therefore, liquidity is assured, at least in the short-term. The retail world is catching onto it as a means of payment versus other cryptocurrencies.
Since it is down from its all-time high of more than $20,000 per Bitcoin, it still has plenty of room to grow, even with so many competitors in the market.
This platform and currency made the smart contract part of the terminology of cryptocurrency. It has seen a lot of gains since it was introduced in 2015. It’s currently only trailing Bitcoin in market capitalization, so it is a widely-discussed and interesting project.
In fact, Intel, Microsoft, JP Morgan, and Chase are working to build business-ready software versions that drive Ethereum. With such market enthusiasm and momentum, Ethereum is here to stay, and investors must consider it as part of their crypto portfolio.
If you’re looking for a crypto that differs from its competitors, Ripple might be for you. It’s an invention from Ripple Labs, and its tokens are used in a variety of low-cost, high-speed money transfers throughout the world. The company announced multiple partnerships with top money-transfer services, and it expects to gain more partners throughout the coming years.
Unlike other options that trade on dreams and hopes, Ripple is already in the real world now, and it is showing signs of being adopted by financial markets.
Another option that features smart contracts is EOS. It’s currently gaining in popularity and is being credited as the first with a blockchain operating system. This helps it offer decentralized applications with parallel processing that live on the blockchain. Therefore, there’s more scalability and faster transaction speeds. Plus, all transactions on the network are free.
Many of its competitors, Ethereum included, require transaction fees to transfer tokens or coins from one wallet to another. With a longer ICO completed, it has an orderly market without the crashes that most cryptocurrencies experienced when they launched.
Cryptocurrencies are still new, and most people continue to be wary of investing in them. Therefore, if you have never invested in crypto before, you may want to start by investing only small amounts with limited risks. Consider building your portfolio to have widely-traded and popular cryptocurrencies, like the ones mentioned here. While initial coin offerings are tempting, they may cause you to lose everything you invest. The best cryptocurrency to invest in is one with which you feel comfortable. Make sure that you do your research and understand the potential risks before making a final decision.