Are you hoping to invest in cryptocurrency this year? Unless you’ve been hiding under a rock, you’ll have noticed that Bitcoin and other types of cryptocurrency have had the investment world in a frenzy during the first two months of 2021. In mid-February, Bitcoin reached a record high of almost $60,000, having risen 72% this year, before going into retreat again.
While cryptocurrency is certainly the talk of the town, it can also appear confusing if you’re a novice in the field.
The market swings are substantial, with huge highs quickly replaced by large losses, so it’s fair to say that cryptocurrency can be both exciting and risky.
Although you can earn a regular income from crypto trading, these enormous swings in value mean that many people choose to get deal in cryptocurrencies as a speculative investment rather than more regular trading.
But before you decide how heavily you’d like to get involved, you can find out more about Bitcoin and other top cryptocurrency names by reading this guide before you start to invest.
How long has cryptocurrency been around?
This guide will describe several different cryptocurrencies in circulation, but the first one to be invented was Bitcoin, which is arguably the most well-known. Launched in 2009 by Satoshi Nakamoto, whose real identity is unknown, Bitcoin made it possible for newer digital currencies to be established too and there are now thousands available in the market.
How does cryptocurrency work?
Cryptocurrency is a recognized medium of payment, using digital transactions to transfer money from one currency owner to another.
You don’t need to be a member of a bank to use cryptocurrency, as the decentralized technology it runs on allows you to make secure payments without needing your identity.
As well as using cryptocurrency for transactions, there are also multiple investment opportunities available which is where the market really becomes exciting.
To obtain units of cryptocurrency, most people will need to purchase them from crypto brokers, before storing them and saving them in their crypto wallets.
Others will get involved with crypto mining, which involves solving a series of complex mathematical equations and recording them on the blockchain to obtain your currency.
Cryptocurrencies move away from banks
While some people love the anonymity provided by using cryptocurrencies, others just don’t want to keep their money in a bank or other financial institution. Why? Let’s look to a country such as Greece as an example.
Keeping your money in a bank can be risky depending on the current economic situation.
For those who live in Greece, with its tax rate of 45%, approximately 900 bank accounts are seized every day.
The situation is similar in Cyprus where the government has been forced to take possession of its depositor’s funds to stay afloat.
The decentralized nature of cryptocurrency means that, unlike fiat currencies, there is no central authority in charge of your money.
Even though cryptocurrency certainly has its fair share of security concerns and reports of hacking, so long as you can keep your currency safe, there’s no chance of it being seized by a government or higher authority.
So, now that you’re familiar with the benefits of cryptocurrency and how it works, let’s explore some of the top cryptocurrency names in the industry.
Let’s start with the main player in the market, Bitcoin, or BTC.
This is the most traded cryptocurrency which promises short-term liquidity should you need it.
You can also expect BTC to be the most accepted digital currency as a medium of payment.
Although the value of Bitcoin has waned slightly from its high during mid to late February, it’s still performing strongly with some experts forecasting growth of up to $100,000 or even $200,000 per Bitcoin.
The market may be extremely crowded, but with this type of growth prediction, there’s every reason to get involved, even if you’re late to the party.
Ether is the cryptocurrency representing the Ethereum network, and it’s probably the second most famous form of digital currency after BTC.
Although they’re both decentralized currencies that can be traded or stored in crypto wallets, Ethereum also enables dapps, or decentralized apps, to build and run without any third-party intervention.
As Ethereum uses its own language on the blockchain, developers can build and run their own distributed applications.
Some of the biggest names in the business, including the likes of Microsoft and Intel, are getting involved too.
If you’re wondering about investment potential, then there’s no reason to believe that Ethereum has hit its peak yet. It would make a safe and sensible addition to any cryptocurrency portfolio.
Ripple, or XRP has carved out its own niche in the market. In comparison to other types of cryptocurrency, it is used for international money transfers which are both high-speed and low-budget.
Ripple is already being used on a widescale basis and could be utilized further within the financial community.
Wondering about Ripple as an investment option? As it grew by 36,000% in 2017, it’s unlikely to see similar growth in the coming years, but it may not retract either due to its real-world use.
What’s the main advantage of EOS? Without question, the fact that it offers free transactions on the EOS network.
Many other cryptocurrency names, including Ethereum, charge a transaction fee per transfer of coins or tokens from one crypto-wallet to another.
But with EOS providing decentralized apps located on the blockchain, you can be assured of super fast transaction speeds which don’t cost you anything. What this means for investors is that EOS is one of the most stable cryptocurrencies in the market, as well as being one of the most popular trading options on exchanges such as Coinbase.
The DOT is credited with being a seriously hot crypto-market contender as of March 2021.
Although it has been around for a few years, the May 2020 genesis block launch of its Relay Chain has transformed movement in this currency.
The price has increased by 350% in the past twelve months, making the DOT the sixth-largest coin in the industry.
If you’re new to cryptocurrency investing, then Polkadot is worth a punt.
ADA, or Cardano has been around for a few years, but its popularity has exploded after some recent blockchain upgrades.
The main feature of these updates has been the addition of smart contract functionality, which now means it can rival even Ethereum in terms of scale and power.
As it has now reached number three on the list of cryptocurrencies by market cap, it’s certainly worth considering if you’re hoping to begin your crypto portfolio in 2021.
Uniswap isn’t a new project either, but its UNI currency has hit the big time since June 2020 as the DeFi sector has grown beyond belief. One of the biggest draws of Uniswap is the ability for other projects to list their coins there free of charge, which strengthens investment opportunities for all.
Liquidity providers can earn rewards by assisting the platform, which is a great loyalty scheme in the crypto sphere. As a result, UNI is the largest DeFi player in the crypto industry – will this be one you’re interested in investing in?
Litecoin is consistently part of the top 10 cryptocurrencies in terms of market cap. It’s also entered the retail arena as an accepted payment method at places such as Overstock.com.
People who have been investing in Litecoin for a while may have seen returns of up to 20x, although the current value is some way off its peak back in 2017.
Even so, the future looks bright for Litecoin, particularly as it offers a speedier transaction time than the crypto giant, Bitcoin.
Beware of crypto scams
Now you know about the different kinds of cryptocurrencies to check out, here’s a cautionary word before you jump in.
Anyone new to crypto investing should be aware of the prevalence of Bitcoin scams.
These are designed to trick internet users into clicking on fake news stories before asking them to register for cryptocurrency investment schemes.
Typically, the victims will then be contacted by phone and harassed into depositing small amounts of money (at first, but then increasing) into a fake crypto bank account.
Sadly, such scams are globally run businesses and have caused thousands of people to lose their life savings.
Which cryptocurrency names are the right choice for your portfolio?
If you’re new to crypto trading, then it may feel daunting trying to choose the best cryptocurrency options for your portfolio.
It’s advisable to begin with a range of digital currencies which are widely traded to offer you the greatest stability for your investment.
Cryptocurrency trading goes hand in hand with volatility, so it would be best to invest your risk capital at first until you gain a greater understanding of the market.
Try to avoid being tempted by initial coin offerings which are often newly minted and tend to experience sudden falls. By investing in more established currencies, you’ll be cushioning the blow somewhat.
To learn more about investing in cryptocurrencies and a wealth of other money management advice, check out our extensive collection of finance articles here at The Finances Hub.