Cryptocurrencies are often touted as an investment with tremendous potential, but they can be extremely risky as well.
This risk is typically attributed to the fact that there has been a massive proliferation of new altcoins, and it can be challenging to know which will yield results.
While most people have heard of Bitcoin by now, there are many alternative options available that you should also consider if you wish to make cryptocurrency a part of your financial portfolio.
What Are Cryptocurrencies?
Cryptocurrencies are digital, decentralized currencies that use cryptography to secure transactions and control the creation of new units.
They are a relatively new type of currency created in 2009 when Satoshi Nakamoto (person or persons unknown even to this day) released a white paper describing a decentralized digital payment system that uses cryptography to secure transactions.
In this sense, cryptocurrencies are not owned by any central authority but instead exist as computer data. You can exchange them for other currencies or goods, or services among peers without an intermediary.
What Currencies Show Good Potential for Investment?
Despite being used for transactional purposes, they are primarily traded as a commodity. While some are bought and sold for no more reason than people think they will accrue value, others are exchanged due to their underlying blockchain technology. Some of the most promising in 2021 include the following.
Litecoin is a peer-to-peer cryptocurrency that has been around since 2011. It is the third most valuable digital currency in terms of market capitalization. Litecoin was the first blockchain to implement Segwit, which increases block capacity and transaction speed.
Litecoin also offers faster confirmation times than Bitcoin. If you are looking to trade, you will need to check the price of litecoin in GBP, USD, or EUR, depending on the currency you typically trade-in.
Litecoin also has a limited supply of 84 million coins, released over time according to a fixed rate to keep transaction fees low and inflation under control. Because of its enticing features, it is a coin you may want to start with or add to an existing holding.
The term “bitcoin” has been in the public eye for over a decade, but it wasn’t until October of 2008 that its underlying technology, the blockchain, began to garner significant attention. Bitcoin is the OG cryptocurrency and the most traded.
Most people have heard of it, and due to its well-known nature, it is the coin to which most others are compared. It is always advisable to have some Bitcoin in your wallet as long as the price is right.
Although its price can be volatile, Bitcoin remains the most popular cryptocurrency with nearly $600 billion total market capitalization.
As the second-largest cryptocurrency after Bitcoin, Ethereum is a widely used and accepted digital currency. Ethereum was created to make it easier for people to develop decentralized applications on its blockchain.
Furthermore, it is Ethereum’s underlying technology that is what provides its value. It looks set to increase in value as the latest blockchain trend begins to take off.
Non-Fungible Tokens (NFTs) rely heavily on the blockchain technology of Ethereum to secure the data that makes them so valuable. Over time, you will discover that Ethereum’s value increases as NFTs flourish.
Dogecoin is a cryptocurrency that has gained a lot of attention from the public, primarily because of its amusing name. It is unique in that it can be used as both an investment and currency.
This means the Dogecoin community can use it as the foundation for new projects, or people can just invest in this crypto with hopes of making money in the future based on market demand.
It has also increased by over 12,000% between January and August 2021 due to a (perhaps) unintentional intervention by Elon Musk.
However, while its value has grown, it might have topped out, so you should do your homework before investing heavily.
Polkadot is a decentralized networking platform that provides all the benefits of a traditional network without any inefficiencies.
The reason to buy it is that it can be the next Ethereum (in terms of its value coming from its technology), with a huge market cap and an active community.
On top of that, many developers are investing heavily in building decentralized applications on top of Polkadot.
Bitcoin Cash (BCH)
Bitcoin Cash supporters believe that its market capitalization will eventually surpass Bitcoin due to its advantages in scalability and lower fees.
Many investors think it will soon become the leading cryptocurrency by market cap because it offers more efficient solutions than BTC. Although this hasn’t been borne out in recent years, the potential still exists, and it is worth a punt.
Chainlink is a security token that allows the transfer of value on a decentralized and secure network. Chainlink’s architecture makes it possible for different intelligent contracts on various networks to communicate with each other.
It allows them to verify and protect data from being altered by hackers or provided fake information.
With this technology, developers can build decentralized applications that are protected from attacks and prevent theft and fraud.
It is currently a relatively low price, and due to its potential applications, it may be an option worth considering.
Important Considerations When Buying Crypto
When buying crypto, there are some considerations you should take into account, such as the volatility of the coin, market, and investment potential.
You should always be careful before committing your hard-earned money to this volatile market. There are many sources available online to help you make an educated decision.
It is also essential to make sure that you use reputable brokers when making a purchase.
There is a wide variety of cryptocurrencies out there today, each with its strengths and weaknesses.
They all have in common that they are based on blockchain technology, so they can be used for peer-to-peer transactions and are resistant to manipulation by hackers and fraudsters.
All the coins mentioned in this article have investment potential if you do your homework.