Best Cryptocurrency to Invest In
What are the top cryptocurrencies for investors?
Since Bitcoin arrived on the scene in 2009, cryptocurrencies have been gaining in popularity. While conceived of as an alternative means of exchange—without the need for government-backed or “fiat” money—today cryptocurrencies are also seen as potential investments.
Types of Cryptocurrency
There are more than 1,500 cryptocurrencies available today. However, the best cryptocurrencies for investing are those that have a large market capitalization. Just as when looking at stocks, you can use it to consider the total value of an issued crypto coin. The larger the market cap, the more likely it is to be liquid, and there’s a better chance it will stand the test of time. Unlike stocks, however, cryptocurrency issuers don’t publish financial statements, so using what limited metrics do exist is even more important.
However, there’s no guarantee that any cryptocurrency, no matter how big or popular, won’t just disappear—the assets have no regulated financial or governmental intermediary. When trying to figure out which is the best cryptocurrency for you to invest in, check to see if it’s available on an exchange.
As a beginner, it makes sense to consider a cryptocurrency you understand, and to think about uses beyond whether it’s a medium of exchange that more people are likely to adopt.
Some of the most popular cryptocurrencies are Bitcoin, Litecoin, Ethereum, and Ripple. Before you start investing in cryptocurrency, learn about your choices, and who they are best for.
Bitcoin (BTC) kicked off the cryptocurrency revolution when it was created in 2009. The original creator remains somewhat of a mystery, but Bitcoin’s unconfirmed founder or founders are known as Satoshi Nakamoto.
Bitcoin makes use of blockchain technology, which allows for peer-to-peer transactions, using a digitized and decentralized ledger. The idea is that there is no need for a third party to verify information or act as a clearinghouse.
Bitcoin made it possible for people around the world to send payment to each other almost instantly—without worrying about exchange rates or bank wire transfer fees. However, over time, other technology has evolved. The average time for a Bitcoin transaction in August 2020 was about 9.6 minutes, which makes it less than instantaneous.
However, while Bitcoin might not ever be adopted as a widespread medium of exchange, there is some expectation that it could be considered a store of value in the future. Its 2017 price went up to more than $19,000 each before crashing, and it remains one of the most dramatic investing stories in recent history.
Created in 2011 by Charlie Lee, Litecoin (LTC) is often considered the cryptocurrency most closely correlated to Bitcoin. In fact, some refer to Bitcoin as “digital gold,” and Litecoin as “digital silver.” For those who want to invest in cryptocurrency, but are put off by the steep cost of a Bitcoin, buying Litecoin can be akin to investing in silver when you don’t want to pay the price of investing in gold. The two cryptocurrencies often move in tandem with each other.
Litecoin also uses blockchain technology, and it’s not uncommon for developers to test out potential Bitcoin tweaks using Litecoin first. Litecoin is also faster with transactions than Bitcoin.
While Ethereum (ETH) launched in 2015, it was first conceptualized in 2013 by Vitalik Buterin. Ethereum uses blockchain technology, but it’s a programmable technology. Ethereum is designed to be open-access and provide a variety of applications.
Indeed, Ethereum’s programmable approach makes it possible to do more than handle money transactions. It’s one of the drivers behind “smart contract” technology that allows for various agreements to be executed in a secure manner directly between parties. For example, a real estate transaction could be completed using Ethereum without the need for an escrow account.
For people who believe that blockchain technology potentially could be adopted for more than financial transactions, and for those who want to purchase something that is more than a cryptocurrency, Ethereum may be a suitable long-term investment.
Launched in 2012, Ripple (XRP) is considered one of the fastest, less expensive, and most scalable decentralized payment settlement technologies. Indeed, Ripple settles transactions in three to five seconds, making it faster than Bitcoin, Litecoin, or Ethereum. The entire focus of Ripple is payment systems.
It’s important to note that you don’t have to just send XRP coins using this network. It’s open-access, and the technology is especially useful for cross-border transactions. These can be settled almost instantly without the need for a bank or other intermediary. While Ripple is primarily a payments network, there are third parties looking into other uses for its technology.
Ripple was originally known for being backed by Google executives, and even today, some formerly involved aren’t sure about using the XRP token as an actual currency, even though you can buy it to use for payments. When investing in cryptocurrencies like Ripple, it’s important to consider why you’re investing, and the potential for adoption of the underlying technology, rather than the currency itself.
Which Cryptocurrency Is Right for You?
For the most part, investing in cryptocurrencies is like considering most other asset classes.
It’s still early to establish whether cryptocurrency will be widely adopted as an investment, but if you’re interested, it’s relatively easy to get started. The platform you use sets the minimum investment.
By opening an account with an exchange like Coinbase, you can buy and sell cryptocurrency even if you’ve never done it before. Here’s what you need to know to get started.
|Cryptocurrency||How Much Money You Need to Invest||Key Details|
|Bitcoin||$2||Reached peak in 2017, then dropped to half the price|
|Litecoin||$2||Considered a testing ground for tweaks and improvements before using them with Bitcoin|
|Ethereum||$2||Programmable blockchain used for a variety of transactions, including smart contracts|
|Ripple||$2||Backed by Google, this platform focuses mostly on instant payment transactions|
Best Cryptocurrency for Investors
As with any investment, the best cryptocurrencies to invest in will fit your own financial needs and reflect what you consider likely to happen in the future. It’s important to note that because they are new, cryptocurrencies are still relatively volatile in pricing, and there is no assurance of their future viability. As a result, it’s important to carefully consider how much of your portfolio should be devoted to cryptocurrency and to determine that allocation in line with your risk profile.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.