Blockchain is the technology that most cryptocurrencies leverage to base their algorithm on. Many risk-averse investors have stayed away from cryptocurrencies, the reason being that they don’t understand the technology behind them.
Hence, all investors/traders need to get acquainted with the underlying technology and book their crypto coins accordingly.
Coming back to the main topic, a cryptocurrency is decentralized, which is not managed by any central authority.
In the recent past, Crypto has gained immense momentum as a long-term investment and a must in the portfolio due to the multi-bagger returns that it offers in a short time.
So, let’s explore the 5 best cryptocurrencies to invest in 2021 & must HODL – Hold onto Dear Life (a pun on the word ‘hold’ which all crypto investors devotedly follow) into your baskets.
5 Best Cryptocurrencies in 2021
The granddaddy of cryptocurrencies, Bitcoin represents 40% of the cryptocurrency market cap. Launched in 2009 with Satoshi Nakomoto’s white paper ‘Peer-to-peer Electronic Cash System,’ a must-read for all bitcoin investors, Bitcoin has crossed an all-time high of $1 trillion in market capitalization.
This deflationary currency has given a whopping 5714% return in 5 years, which means that if I had invested $100 in 2016, adjusting for inflation, it would be worth $5814 in the present day.
All these reasons constitute the purpose of investing in Bitcoin –
- It is inflation-proof, indicating that the number of bitcoins mined is limited. This ensures that demand would always win oversupply, implying that the value would increase consistently over a while.
- It has emerged as a storage-of-value coin rather than a currency for day-to-day transactions. This has been proven when many HNIs and Silicon-valley biggies have included bitcoin in their investment portfolios.
- Many businesses such as PayPal, MicroStrategy, Apple already accept Bitcoin as payment and reward their employees/customers in the form of this digital gold.
- It has attracted a large number of millennials because you can buy a fraction of bitcoin, the smallest being 0.00000001 BTC (called 1 Satoshi), instead of spending thousands of dollars on one.
Having said this, each cryptocurrency comes with a bunch of negatives and buts. The most valid of them all would be that the value of Bitcoin fluctuates largely.
This could prove harmful for risk-averse investors, invoking a sense of nervousness and anxiety amongst them on every price dip.
Thus, one should enter the bitcoin chain only after thorough research and analysis and choose what suits him best.
Ethereum is an open-source, decentralized blockchain platform developed by Vitalik Buterin, a Russian Computer Science student at the mere age of 21.
Ether or ETH is its native cryptocurrency which ranks 2nd in terms of market cap after Bitcoin at $275 billion.
A strong ROI of approximately 23,000% means $100 invested in 2016 would be worth $20,000 today.
Ethereum is a developer’s favorite in the world of Dapps (Decentralized Applications) and forms the basis for many projects worldwide. Why should one invest in ETH?
- Ethereum follows a POS (Proof-of-Stake) approach, which compels miners to stake their ETH while validating, a more nature-friendly and less-energy-consumer approach than Bitcoin’s POW (Proof-of-Work).
- With the EIP 1559 fork coming soon, Ethereum will prove highly beneficial for investors as it aims at reducing the fees that the miners charge for validating a transaction. An investor-friendly move, ETH would see a spike in its price shortly.
- ETH’s network has been designed to promote its usage as a day-to-day currency rather than store-of-value. Thus, investors owning ETH would always be on the good side irrespective of its future role.
- Defi (Decentralized Finance) is leveraging Ethereum to a large extent for developing projects without any downtime, fraud, control, or inheritance from a third party. This again is a positive in terms of its usage and value.
Ethereum has been subject to many hacks, the DAO attack of 2017 being the largest, resulting in huge losses of funds from the Ethereum network.
Keeping this in mind, investors must weigh the pros and cons of this cryptocurrency and the underlying technology before investing in Ethereum.
A brother to Ethereum, Cardano was launched in 2015 by a co-founder of Ethereum – Charles Hoskinson.
It often draws comparisons with Ethereum as it shares many common features and facilities such as Smart Contracts, Dapps, etc.
Ada is its underlying cryptocurrency named after the programmer Ada Lovelace, with a market cap of $50.2 billion and an ROI of 226%.
Apart from being used as a currency for transactions, Cardano also gives holders a stake in the network, enabling them to vote on proposed technical alterations. Reasons to invest in Ada –
- Cardano is under constant Academic backing and has gained immense respect amongst researchers. This gives it an edge over other coins as it is constantly improving and gaining credibility.
- Due to multiple layered architectures, updates can be performed without any disruption in ongoing transactions and payments. A settlement layer and computational layer have enhanced its scalability and speed of transactions.
- Google searches for ‘Cardano news’ have peaked massively in the past few months. You can consider this as a clear indicator that many people are investing in this coin which is another positive indication.
However, a large number of Ada tokens, around 74%, are staked, which could also be a downside for the number of tokens available.
Thus, it is important to brief yourself with all the possible risks that could arise by investing in Cardano and take measures to mitigate them.
This new coin round the block has recently made news during the massive crypto dip. Founded by 3 Indians – Sandeep Nailwal, Anurag Arjun, and Jaynti Kanani back in 2017 with the name Matic Network.
With a market cap of $11.83 billion, Polygon was designed to compact the issues prevailing in the Ethereum network, such as scalability and usability.
It strives for decentralized execution while ensuring near-instant transfers, minimum fees, and conducive economics for transactions.
Now, why should anyone invest in this coin?
- Matic would work hand-in-hand with Ethereum. Ethereum is a large network in itself and is constantly under some form of a fork, trying to solve their loopholes, paving the way for Matic to gain momentum in a limited period, proving beneficial for Matic holders.
- Matic Network is a Layer 2 scaling solution. It achieves scale by utilizing sidechains for off-chain computation. It ensures asset security using the Plasma framework and a decentralized network of Proof-of-Stake (PoS) validators.
- Value proposition, the unique technical approach, has made it one of its kind in this crypto ocean. Matic sidechains are best suitable for Defi protocols and offer a user experience comparable with those of centralized apps.
Matic has issues such as slow transactions, high transaction fees, which could essentially prove to be a barrier for investors to diversify.
Thus one must keep in mind the advantages and disadvantages of Polygon before staking their money into it.
The dictionary meaning of Tether is ‘a rope or chain tied to an object to restrict its movement’. This cryptocurrency follows the same approach.
For all the risk-averse investors, Tether is the most appropriate option to invest in.
This stable coin, initially known as a real coin, was launched in 2014 and currently has a market cap of $24.4 billion.
Tether is a blockchain-based crypto coin backed by an equal amount of fiat currency such as the Dollar, Euro, Yen residing in an individual’s bank account.
Thus, the value of Tether would move in conjunction with these conventional currencies. Native tokens of the tether network trade under the symbol of USDT. Reasons to invest in Tether –
- This crypto coin aims to hold a stable crypto price instead of the large market fluctuations witnessed by all other cryptocurrencies. This makes it a safe and sound option as it would derive its underlying value from the native fiat currency such as the Dollar and prove prudent in a bull and a bear market.
- It removes transaction costs and delays that impair trade execution with the crypto ecosystem.
- Investors can also swap USDT, turn into USDT Liquidity providers to earn fees, and boost their returns by a large multiple.
Again, each cryptocurrency comes with a bunch of negatives. In 2017, Tether was allegedly hacked, and $31 million worth of Tether coins were stolen.
This would potentially not harm investors in terms of their holdings.
However, such news tends to cause a dip in the market value due to fear and anxiety among investors.
Thus, investors are obliged to research well before making an emotional and financial investment in any assets.
Cryptocurrency has become what the Internet was in the 90s. Along with enormous potential opportunities and functionalities, it has a bunch of laggards as well.
The internet boom was followed by the burst of the dot com bubble in the early 2000s, which drained bank accounts of people who mindlessly invested in tech stocks.
This was a clear lesson that can be applied to potential traders today as well. Understand the underlying methodologies, create a risk mitigation plan, read on various companies’ growth trajectories, and then invest prudently with a calm and patient outlook.
I hope this article helps you and if you have any queries related to it, leave your comment below. If you have not joined our community then you can now. We are very active there and have been sharing important information there.
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