Key Takeaways
Bitcoin |Ethereum |Litecoin | Tether | Cardano | Polkadot |Bitcoin Cash | Dogecoin |Binance Coin | XRP
For a long time, “cryptocurrency” was practically synonymous with “Bitcoin.” But that’s no longer the case. Nowadays, there are many different cryptocurrencies. Some have achieved large market caps, Wall Street backing, and a level of public interest that’s comparable to Bitcoin.
With so many hot cryptocurrencies in 2021, which is the best cryptocurrency to invest in?
1. Bitcoin (BTC)
Bitcoin was the first cryptocurrency to achieve widespread success, and it’s still the best cryptocurrency to invest in.
You might have heard the saying, “the early bird gets the worm,” and that’s very true with Bitcoin. Many of Bitcoin’s strengths come from it being the first major crypto player. Many beginning investors immediately associate cryptocurrency with Bitcoin. It’s often the first coin that investors purchase when they’re getting into crypto investing. Bitcoin has an astonishing market cap of over $780 billion, which is more than double the size of the next largest cryptocurrency.
That may sound like a superficial bullet point, but the sheer volume of Bitcoin investments provides tangible advantages for investors.
Because so many people are investing in Bitcoin, the Bitcoin market enjoys higher liquidity than other crypto markets. If you need to buy or sell, it’s more likely that you’ll find an immediate buyer or seller.
Crypto investors make the most profit when they’re timing the market—buying low and selling high. They attempt to execute transactions when the price is just right. It’s easier to do that when the market is highly liquid, and orders can be executed soon after they’re placed.
Bitcoin has also earned its “street cred” over the years. It’s trusted and regulated by U.S. financial authorities, and its legal status is not currently threatened by additional regulation—unlike newer cryptocurrencies, like XRP.
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2. Ethereum (ETH)
With a market cap of nearly $300 billion, Ethereum is the second-largest cryptocurrency behind Bitcoin. Ethereum may only have 18% of the total crypto market (Bitcoin has about 47%), but it has more than four times the market cap of the next closest token.
Ethereum has a much different focus than Bitcoin. The Ethereum platform is mostly used to power decentralized finance (DeFi). DeFi apps enable you to transfer money without going through a major financial institution—most of which charge high transaction fees and take 3 to 5 days for transactions to go through.
Blockchain is a faster and more cost-effective money transfer method, especially if you’re transferring money across borders. Ethereum provides developers with a blockchain infrastructure to build decentralized finance systems. DeFi apps can also be used to create and exchange nonfungible tokens (NFTs), which are becoming hugely popular around the globe.
Since Ethereum has a more practical application than Bitcoin, many crypto enthusiasts think it has a brighter and more lucrative future. Ethereum has been especially innovative with its method for validating transactions. Unlike Bitcoin’s proof-of-work system, Ethereum uses a more equitable proof-of-stake system that ultimately provides tighter security.
Plus, Ethereum enjoys the same “trusted” status among U.S. regulators. It’s available for trading on all American crypto exchange platforms.
3. Litecoin (LTC)
While it’s often considered the “silver version” of Bitcoin, Litecoin has some unique features that set it apart.
Litecoin is faster at validating transactions than Bitcoin. While Bitcoin validates transactions every 10 minutes, Litecoin validates transactions every 2.5 minutes. That means that investors can execute trades faster with Litecoin, which may be important for active traders and DeFi developers.
Litecoin uses a proof-of-work system for validating transactions, just like Bitcoin. But Litecoin uses a different algorithm that generally requires less computing power to decode. If you’re a miner, you can mine Litecoin with consumer-grade CPUs, and you won’t ever need to join mining pools or assemble powerful crypto mining rigs. Not only does that make Litecoin a more equitable cryptocurrency, it’s also somewhat of a public relations gem (remember when Bitcoin got called out by Elon Musk for excessive power consumption?).
Litecoin has a market cap of about $10 billion, making it the sixth-largest cryptocurrency in the world. It’s being accepted by a growing number of merchants, and there are more developers starting to use it due to the fast block generation rate. The icing on the cake: Litecoin is only about $150 per token, so it’s a cheaper token to stockpile.
4. Tether (USDT)
Tether was one of the first stablecoins to hit the market. Stablecoins tie their value to a fiat currency, commodity, or index to try and reduce volatility. As investors have become more aware of the pitfalls of crypto volatility, stablecoins have grown rapidly in popularity.
Like many other cryptocurrencies, Tether is mostly used to transfer money between individuals. Although blockchain transactions are usually faster and cheaper, there’s always a risk that price volatility will impact the value of the money that’s been digitized.
Tether’s price is tied directly to the U.S. dollar. Not only does this keep the price relatively stable, but it also allows users to convert their cryptocurrency into U.S. dollars very quickly.
Because the price is mostly stable, Tether may not be an attractive option for some active traders. The most successful crypto investors capitalize on big price fluctuations. It may be harder to generate a large return on investment without the volatility that other cryptocurrencies possess.
However, Tether is a great option for investors who want to get into cryptocurrency, but who are wary about the volatility. And Tether’s market cap seems poised to grow. Currently, Tether is the third-largest cryptocurrency in the world, with a market cap of over $24 billion. Plus, a single token is valued at just $1.
5. Cardano (ADA)
Cardano was created by Ethereum co-founder Charles Hoskinson. Like Ethereum, Cardano was primarily designed to provide blockchain infrastructure for DeFi developers.
One big problem with Ethereum and Bitcoin is that they require a large amount of computing power to validate transactions. Both platforms incentivize high energy usage.
Cardano, on the other hand, can run on just a fraction of the energy required by Ethereum and Bitcoin. Cardano uses a proof-of-stake system to validate transactions—it was one of the first crypto platforms to embrace proof-of-stake.
Under the proof-of-stake model, each miner is granted computing power that’s proportional to the number of coins they hold. That makes it disadvantageous for the miner to attack the network—validation errors will cause the miners to lose their coins. This system gives the blockchain added security and reduces energy consumption by eliminating mining pools and high-energy mining rigs.
Cardano is the fifth-largest cryptocurrency, with a market cap of over $42 billion. By Fall 2021, it will be fully equipped to power DeFi apps, which may increase the number of users and put it on level footing with Ethereum and Tether. There’s plenty to look forward to with this cryptocurrency.
6. Polkadot (DOT)
Cryptocurrencies use different blockchains. You may be able to exchange tokens from different cryptocurrencies, but any program or protocol running on one blockchain may not be compatible with a different blockchain. For example, you can’t run Ethereum apps on Bitcoin.
Polkadot is an innovative cryptocurrency that can integrate different types of blockchains and make them work together. Polkadot does this by using “relay chains” that synchronize blockchain networks.
On Polkadot, developers can create decentralized applications that can run on multiple blockchains. They can also secure their application with multiple blockchains, which provides an additional level of security.
With so many cryptocurrencies on the market—and potentially even more launching in the future—Polkadot is all the more relevant. If decentralized applications grow in popularity, Polkadot could be an essential tool for developers to build multi-blockchain programs.
Crypto investors appear to see the upside. Between September 2020 and June 2021, Polkadot’s price grew by a staggering 615%. It currently has a market cap of over $21 billion. If you want to invest in a “next big thing” cryptocurrency, Polkadot might be a good option for you.
7. Bitcoin Cash (BCH)
Bitcoin was a pioneering cryptocurrency, but it did suffer a few growing pains in its early years. Some Bitcoin users were unhappy with the blockchain’s small block sizes. Only small amounts of data could be validated at one time, which resulted in slow transaction times and higher fees.
Bitcoin was eventually “forked” and divided into two different cryptocurrencies: Bitcoin and
Bitcoin Cash. Bitcoin Cash has a larger block size, which means faster transaction times and—in theory—lower transaction fees.
One of the problems with Bitcoin Cash is that there aren’t as many users. With fewer users, there’s less liquidity, and the prices are much less stable than Bitcoin.
However, there’s plenty of upside to Bitcoin Cash. Because it uses larger block sizes, Bitcoin Cash has greater potential to scale. If cryptocurrencies and decentralized applications continue to grow in popularity, Bitcoin Cash would be a much better blockchain for crypto developers and active traders than Bitcoin.
Bitcoin Cash is also growing a fair amount. As of June 2021, the price has nearly doubled since the start of the year. It’s currently the 12th largest cryptocurrency in the world.
8. Dogecoin (DOGE)
Dogecoin was born from the internet’s meme culture. It originally started as a joke in 2013 but has become rapidly popular thanks to celebrities, influencers, and billionaires like Elon Musk. Dogecoin has a market cap of $44 billion, and it surged 4,000% in 2021, making it the eighth-largest cryptocurrency in the world. There’s something fun about a cryptocurrency whose mascot is a silly dog.
Dogecoin has a major drawback—unlike Bitcoin or Ethereum, there’s no limit on the number of tokens that can be created. That makes the cryptocurrency highly susceptible to devaluation as it continues to grow.
However, there’s also plenty of opportunity for savvy traders. Dogecoin has a fast mining rate and can support exponential growth when demand surges. Active traders can make a high return on investment by carefully watching Dogecoin prices and acting quickly.
9. Binance Coin (BNB)
Binance Coin is a cryptocurrency that’s used to trade and pay fees on Binance, one of the world’s largest crypto trading platforms. When it launched in 2017, Binance Coin was mostly used to facilitate trades—if you finance trades with Binance Coin, you can trade at a discount. Now, Binance Coin is traded by crypto investors just like any other major cryptocurrency.
Like Bitcoin, Binance Coin has a limit on the number of tokens in circulation: 200 million. For balance, Binance Coin “burns” much of its cryptocurrency on a quarterly basis, using one-fifth of its profits to buy and remove BNB from the market altogether. This innovative model helps Binance Coin maintain a very high value, while also creating quarterly demand to stimulate growth.
The strategy has been successful. In 2021 alone, Binance Coin surged over 700% in value. With a market cap of over $50 billion, Binance Coin is the fourth largest cryptocurrency in the world.
Cryptocurrency is growing more popular and more investors are using platforms like Binance. For that reason alone, it seems as if Binance Coin has a bright future.
10. Ripple (XRP)
Ripple is a cryptocurrency that’s used to facilitate decentralized money transfers between individuals and enterprises. Before 2021, Ripple was one of the fastest-growing cryptocurrencies and known for its unique structure.
Ripple is a pre-mined cryptocurrency, which means that it owns a predetermined number of tokens that are released periodically. Tokens are not created through traditional mining. Ripple’s own method of transaction validation is more efficient than traditional mining, although critics argue that the blockchain is less secure because there are fewer miners tending to it.
Unfortunately, Ripple has been entangled in a lawsuit with the SEC since December 2020. Consequently, it was delisted by nearly all major crypto exchanges in the United States, including Coinbase, Kraken, and Binance.
You can still trade XRP on crypto platforms outside the United States. But its future in the United States is uncertain. These are the growing pains of the cryptocurrency industry. Government authorities are still determining how to regulate digital currencies, so it’s possible that some—if not all—cryptocurrencies encounter similar struggles.
Crypto Investment Strategies
Before you invest in cryptocurrencies, you must understand how this type of trading works. You could lose a lot of money if you approach cryptocurrencies in the same way that you approach other types of securities.
Cryptocurrencies are a volatile asset—they’re subject to enormous price swings at a moment’s notice. A token can surge or fall over 100% in value over the course of a single day or even hour. For that reason, cryptocurrency is not generally considered a long-term investment. There’s no indication that cryptocurrencies will grow steadily over five to ten years, or that they will generate a higher return on investment over a long period.
Most crypto investors do active trading. They make speculations about when a token will rise or fall, and they’re ready to buy or sell when the price swings begin. To succeed in active trading, you need to understand advanced trading tactics, like stop orders and limit orders. You also need to be watching the crypto market very closely, every day.
If you want to generate a reliable passive income or build retirement savings, there are many investments that will provide you with safer, steadier returns. These investments include:
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Retirement funds (IRAs and 401(k)s
People are drawn to “get rich quick schemes,” and some investors mistakenly pour thousands of dollars into cryptocurrencies expecting a lucrative payout. In reality, the most lucrative investments are the “slow and steady” ones that provide reliable returns year after year.
If you are going to invest in crypto, remember never to invest more than you’re willing to lose. Try and maintain a “pyramid-style investment portfolio” where most of your funds are put into low-risk investments, while only the smallest portion of your funds are put into high-risk investments.
Summary
In 2021, Bitcoin is the best cryptocurrency to invest in because it has the largest market caps. Since there are more Bitcoin owners than any other type of cryptocurrency, the Bitcoin market enjoys the highest liquidity, which is optimal for advanced trading. Other promising cryptocurrencies include Ethereum, Litecoin, Tether, Cardano, Polkadot, Bitcoin Cash, Dogecoin, Binance Coin, and XRP. Before you invest in cryptocurrencies, be sure you understand how to do advanced trading, and consider balancing your investment portfolio with low-risk investments that provide more reliable returns.
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