The cryptocurrency market offers great opportunities for investors. Today's blockchain industry is home to more than 8,000 digital assets, more efficient counterparts to traditional financial instruments, and first-class platforms for those looking to grow capital and contribute to the future of technology.
The variety of offerings requires caution on the part of newcomers and experienced market participants alike. One should check the project's credibility and profitability and prepare for possible volatility. Many start-ups that offer innovative developments need time to develop and establish themselves in the market.
There are several factors behind the popularity of each well-known project - reliability and development prospects, profitability and rate fluctuations, dynamics and unique features.
In turn, when evaluating a cryptocurrency's prospects, two questions should be answered:
- Who is behind the project?
- What does the project offer?
One strategy for success is to follow the largest assets in terms of market capitalisation.
Today's cryptocurrency industry is not a patchwork of assets, but a powerful ecosystem that is replacing traditional finance. It is based on NFT and DeFi, the impact of which is important to consider when investing in any given project.
Non-fungible tokens (NFTs) allow any object to be represented digitally and recorded in an immutable blockchain. The technology has found widespread use in several ways:
- among writers and artists, for whom it allows them to prove the copyright of any art object;
- among digital collectors, who collect NFT recordings of rare moments related to their favourite sports teams and other tokens with financial potential and cultural value;
- among gamers, who can exchange items and characters comfortably regardless of changes in game projects or even their closure.
With the development of decentralised finance and legal regulations, NFT will become possible when buying and selling real estate or transport.
Decentralised finance, or DeFi, is a broader concept that includes NFT. One of the central concepts to DeFi is smart contracts - a better counterpart to traditional contracts that are executed strictly according to terms specified in advance by the parties.
Another closely related concept to smart contracts is decentralised exchanges or DEX. Such exchanges allow users to directly exchange assets using smart contracts. In the long term, DEXs have the potential to replace traditional stock exchanges, paving the way for investors to buy shares directly from companies.
The oldest digital asset was introduced in 2008 as a response to the crisis gripping the global economy. During the 2021 crisis, bitcoin performed best among strong alternatives - gold and growth stocks.
In less than four years, between 2017 and 2021, BTC tripled from $20,000 to $60,000. The adoption by large corporations and public funds as a means of payment and a tool to protect against inflation offers several advantages:
- minimises exchange rate fluctuations;
- gives a boost to the mass adoption of cryptocurrency;
- ensures further growth in exchange rates and capitalisation.
The main feature and advantage of ETH are that it serves as the settlement currency of the Ethereum ecosystem. Deployed in 2014, the platform remains the largest in the field, attracting developers of exchange services, games, marketplaces, non-exchangeable tokens (NFTs) for collectors and other decentralised products.
Ethereum serves as the foundation for emerging NFT and DeFi markets that could replace the legacy traditional financial system.
The rate dynamics indicate that ETH is poised to repeat the path of bitcoin:
- 2015 - the start of ETH trading on cryptocurrency exchanges, starting price: around $3;
- January 2018 - the rise of the cryptocurrency market and boom of ICOs, or initial coin offerings, based on Ethereum, price: $1,400;
- November 2018 - the peak of negative market sentiment, price: $85;
- early 2021 - development team working on a better performing ETH 2.0 platform, acceptance of the asset by institutional investors, the transition of traditional financial services to a decentralised basis, price: $2,100.
Binance Coin (BNB)
Created a few years earlier as an internal Binance exchange token, BNB has evolved into a strong competitor to ETH by the end of 2020. The reason is the trading floor's team chose a successful strategy: the team launched its decentralised ecosystem, Binance Smart Chain, whose native token was also BNB.
The platform, which is productive and low-cost, quickly gathered a wide audience of users, traders, investors and developers, while Binance itself relinquished control of the ecosystem.
Prospects for the token remain strong thanks to Binance's work on the Binance Card and Binance Pay solutions, attracting users of traditional financial solutions to advanced technology.
All of this allows the cryptocurrency to not only hold its own in the top 3 but also to claim to be the financial space leader of the future.
Launched in 2017, Binance Coin has proven to be both secure, promising and highly profitable:
- July 2017 - launch of BNB, starting price: $0.12;
- January 2018 - market rebound and the first wave of interest in blockchain-based financial solutions, price: over $20;
- December 2018 - the peak of negative market sentiment, price: $4;
- late 2020 - launch and expansion of the Binance Smart Chain ecosystem, price: $40;
- April 2021 - the surge of interest in NFT and DeFi, the start of the transition of traditional finance to decentralised solutions, price: $380.
The history of Ripple goes back to 2004, a few years before the first cryptocurrency, bitcoin. The project, developed by Ryan Fugger, began as a payment system in 2005.
In 2011, the company decides to develop its decentralised network based on the XRP token. In 2013, Ripple sets a new goal of connecting cryptocurrency and banking technologies. The first partner in the revamped ecosystem is Fidor Bank, Germany.
The main benefits for banks are faster payments, even compared to bitcoin and no need for additional transaction confirmations.
The project has managed to cope with regulatory pressure, with the support of major players that are betting on fintech. The latter has had a positive effect on the XRP exchange rate:
- April 2017 - launch of the XRP token, starting price: around $0.03;
- January 2018 - the rise of the cryptocurrency market and signing of cooperation agreements with the traditional financial sector, price: $2.60;
- December 2020 - fall to a local high under pressure from US regulators, causing excitement among some Ripple network partners, price: $0.25;
- April 2021 - market interest in fintech and decentralised technology, the succession of startup wins in SEC vs Ripple case, price: $1.
The first of its kind, the stabelcoin Tether (USDT) was introduced in 2015. Unusual at the time, the idea of tying a cryptocurrency asset to a traditional currency at a 1:1 ratio quickly resonated.
Stablecoin is actively used by exchanges and traders who, for one reason or another, are unwilling or unable to interact directly with the real dollar.
USDT, created as a fork of bitcoin (USDT Omni), will later expand into the Ethereum (USDT ERC) and Tron (USDT TRC) networks.
Tether Limited continues to integrate the token into promising ecosystems, making USDT the number one solution for those who need a payment gateway between traditional and decentralised finance.
The IOHK Foundation has overseen the development of the Cardano ecosystem and its internal token ADA since 2017. However, significant steps towards making Cardano a strong DeFi platform have been taken by the team since late 2020:
- the launch of the Mary hard fork, laying the foundation for third-party tokens, smart contracts and decentralised services to function in the Cardano ecosystem;
- upgrading the official Cardano Daedalus wallet and its support of tokens in the ecosystem;
- negotiations with the Ethiopian government to launch a blockchain lab in the country and to use Cardano as the basis for the national ID system.
IOHK is focusing on Africa, the fastest-growing and fastest-developing market. According to the team's model, this decision will allow Cardano to become the first cryptocurrency with 1 billion users.
The trend reflects the confidence of ADA investors with the activation of IOHK:
- September 2017 - launch of the project positioned as an alternative to Ethereum, starting price: $0.05;
- January 2018 - general market upturn, price: $1;
- December 2018 - general market decline, price: $0.02;
- January 2021 - increased developer efforts, overall positive market sentiment, price: $0.30;
- March 2021 - launch of Mary hard fork, price: $1.20;
- April 2021 - new announcements from IOHK, price: $1.25.
Polkadot aims to create a truly decentralised internet of the future, and there are some features associated with it:
- the ability to create new blockchains within the ecosystem (parachains);
- interoperability with blockchains of other projects;
- Internet of Things (IoT) coverage - the network is ready to connect millions of smart devices.
The project involves:
- Gavin Wood, co-founder of Ethereum, PhD in software development;
- Parity Technologies, developers of the popular Ethereum and Bitcoin client software;
- Web3 Foundation, a leading foundation supporting developers and researchers of Web 3.0 solutions.
Announced in 2016, Polkdot had already raised a record $145 million in development through an ICO the following year. Between 2017 and 2020, the DOT developers - over 100 experts from 5 teams - were focused on improving the platform. The full-featured version unveiled in 2020 was praised by third-party developers and investors alike, allowing DOT to gain a foothold in the top 5 largest cryptocurrencies. as evidenced by the rate dynamics:
- August 2020 - $ 3;
- September 2020 - $ 6;
- January 2021 - $ 9;
- April 2021 - $45.
The former are attracting the attention of one of the most ambitious and complex technologies. The latter appreciate the ease of operation - the end user only needs to install the polkadot.js plug-in on a browser to get started with the network.
Apart from the course, the interest is evidenced by the transition of other projects to the "rails" of Polkadot. One of the most prominent projects that are preparing to expand to Polkadot in 2021 is Tether (USDT).
One of the leading decentralised exchanges, featured in Ethereum, simplifies the work of traders by offering to do away with complicated order handling for beginners, instead of sending their cryptocurrency to specific addresses and receiving the right assets in return.
The automated platform looks promising, and its team is announcing the launch of Uniswap v3 with expanded functionality and better performance. Uniswap's momentum shows confidence in the project:
- September 2020 - $2;
- December 2020 - $ 3.5
- February 2021 - $20;
- April 2021 - $ 30.
One of the oldest cryptocurrencies continues to grow strongly. A more productive alternative to bitcoin with low fees is preparing to integrate MimbleWimble (MWEB) technology, which protects user privacy.
Litecoin sticks to its development vector as a means of payment, without trying to replace the entire decentralised web. This policy may have advantages, as the LTC exchange rate does not depend on third-party projects:
- 2013 - early stages of Litecoin and the crypto-industry, price: $3;
- 2015 - one of the first bull market cycles, price: $35;
- 2017 - massive market upturn, price: $300;
- 2018 - market downturn, price: $25;
- 2021 - general industry upturn, the announcement of MWEB protocol for LTC, price: $200.
The creators of Chainlink have chosen a niche market of "oracles" - platforms that collect data from the real world (such as transactions or bets) and transmit it to a virtual environment. Chainlink has its LINK token, works with Ethereum smart contracts, and is also able to connect to the Bitcoin network.
The project was funded in 2014, but its early years were marked by failures and scandals. Chainlink became fully operational in 2018, initially without attracting any attention:
- 2018 - launch of Chainlink, price: around $0.30;
- 2019 - consolidation of the project, maximum price: $3.50;
- 2020 - growing interest in the crypto industry and oracle niche, price: $15;
- 2021 - a convergence of traditional and decentralised financial markets, price: $30.
How to make money from cryptocurrency?
The two most popular and affordable ways to make money from digital assets are trading and long-term investments. Each with its advantages and disadvantages.
Trading allows you to make money from short-term fluctuations in the rate of the cryptocurrency - usually within a day.
the opportunity to make the most of short-term opportunities to make money in the market;
fast earnings - you can expand your capital under management on the same day.
time costs - trading cryptocurrencies requires constant monitoring of market conditions
financial costs - in short-term and medium-term markets the situation can be unfavourable, leading to losses of funds for the trader;
complexity - you should be aware of the peculiarities of a complex trading interface to start trading on a trading platform.
The solution is to use trading bots or switch to DEX, however, here you should also take into account the peculiarities of the solutions:
Incorrect configuration may lead to loss of funds. Machine algorithms do not take into account all possible market situations, forcing users to monitor robot operations even if the program is fully correct.
Although decentralised exchanges reduce trading to sending some tokens and automatically crediting others, their disadvantages are financial limitations:
- high commission networks;
- high start-up capital requirements on the trading account.
The alternative to trading is long-term investments. Studying the rate dynamics of leading cryptocurrencies in the last several years, you can conclude that any worthwhile project with a focus on decentralised finance and Web 3.0 pays for itself and brings profit.
Cryptocurrency investment portfolios are the solution for those who want to secure themselves and maximise their profits. The latter are helped by specialist platforms like Broex.io to collect and hold.
- passive earning - the investor does not need to constantly monitor market fluctuations or take any action. It's enough to gather the optimal portfolio for your goals at the start;
- capital appreciation - the cryptocurrency industry is stable over long periods. An investor aiming to hold digital assets for several years has a better chance of earning than a trader.
long-term investors have no opportunity to make money from short-term rate fluctuations. However, this practice is slowly becoming a thing of the past - as capitalisation expands and big players get involved, the volatility of digital assets is steadily decreasing.