Back when Bitcoin was created in 2009 as a response to the financial crisis, the world had gained a new asset class and its first digital currency. Several years later, thousands of cryptocurrencies are in existence, all with different specialties and uses. The cryptocurrency market has now reached US$1.3 trillion and is still growing. In such a large market, how can an investor determine which digital currencies to invest in?
Similar to how you would approach the stock market, you should only invest money you are comfortable losing because cryptocurrencies can be very volatile.
This is a quick rundown of some of the most popular cryptocurrencies to date, but if you want to get into the nitty-gritty, you can use the trading platform Crypto Engine's resources.
Here are five of the best cryptocurrencies of the year 2021:
- Bitcoin (BTC)
Bitcoin is undeniably the most significant player in the cryptocurrency field. Its sheer size is the reason why retail and institutional investors start their crypto investments with Bitcoin. It's often nicknamed "digital gold" because of the high value given by its network. Others see it as a way to guard against currency depreciation for developing countries, and it can also be used for faster and more efficient fund transfers across borders. Bitcoin's prices have reached an all-time high of US$65,000 last mid-April but have since fallen again, but there is still room for recovery because Tesla Inc. has decided to put Bitcoin on its balance sheets.
- Ethereum (ETH)
A close second to Bitcoin is Ethereum. As per Coinbase, Ethereum makes up for 18% of the cryptocurrency market, relatively small to the 47% that Bitcoin commands. The native currency is called 'ether' but is commonly referred to as Ethereum. Ethereum also doubles as a crypto-application development platform for users. It is currently the leader in using DeFi or decentralised finance, a system that allows users to make smart contracts programmed to execute functions once certain conditions are met. It can be a money-saving platform since its use of DeFi eliminates third parties like banks and brokerages. Decentralised finance may also be the way forward for creating new cryptocurrencies and the creation of non-fungible tokens.
- Cardano (ADA)
Similar to Ethereum, Cardano is a cryptocurrency that makes use of decentralised finance to conduct peer-to-peer transactions. Its native currency is called Ada, and it was founded by Ethereum's co-founder Charles Hoskinson. Cardano was designed to be way more energy efficient and uses a fraction of Bitcoin and Ethereum's resources. This efficiency is thanks to the 'proof-of-stake protocol that discourages high energy consumption and is gaining traction for security reasons. As per Coinbase, Cardano is currently at US$43 billion and ranks fifth among the most valuable digital currencies.
- Dogecoin (DOGE)
A cryptocurrency named after the Shiba Inu meme that the internet has dubbed "Doge," Dogecoin was established as a lighthearted take on the cryptocurrency craze back in 2013. All per Coinbase, it has grown by about 4000% just this year alone, placing it eighth in terms of market cap. Its price reached a high of 70 cents last May, but Dogecoin's prices remain less than a dollar since it has an unlimited capacity to mine more coins. For comparison, Bitcoin will only ever have 21 million coins, but Dogecoin already has 130 billion coins in circulation and is still multiplying. It is still speculative, but its faster mining rate gives it a quantifiable advantage over other cryptocurrencies.
- Binance Coin (BNB)
Binance Coin is similar to Bitcoin. Wherein there will only ever be a limited amount of coins in circulation. It has a limit of 200 million and is currently the fourth most valuable cryptocurrency to date. It is the native currency of the exchange platform Binance, and as per the article released on 29 December 2020, it has risen in value by 700% in 2020 since 2019. It operates on a different model compared to most currencies, though: it uses a fifth of its profits to "burn" a portion of its currency quarterly. What was once crypto surrounded by pure speculation now has a market cap of $50 billion and continues to grow in popularity.
Speaking of exchange platforms, we have just one for you. Crypto Engine is a trusted and secure crypto trading platform. It can set you up with the tools you need and help you start investing in cryptocurrencies.
However, deciding on which cryptocurrency to buy would depend on your risk tolerance and technical knowledge at the end of the day.
Tom Murphy a SEO manager at Adsy.
Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory, or political events. Before deciding to trade/invest in cryptocurrencies you should be fully informed of the risks and costs associated with it, carefully consider your investment objectives, level of experience, & risk appetite, and seek professional advice where needed.