Without preparation, without basic knowledge of cryptocurrencies, it is difficult to choose the right currency to buy from the thousands on the market. To select the right ones and build an investment portfolio, you should start with an analysis of existing currencies.
To separate a promising project from a "scam" and choose the right cryptocurrency to invest in, you need to answer three simple questions:
- How popular is the chosen currency in the market?
- Is the selected cryptocurrency easy to deal with?
- How is the selected cryptocurrency protected from hacking attacks?
Popular cryptocurrencies are traded on all crypto exchanges, with news about them at the top of the news feeds. Based on the trading progress of popular currencies, analysts predict the market dynamics. Buying a well-known digital currency reduces the risk of loss.
The ease of dealing in cryptocurrency is the second most important measure of valuation. The more market operators - exchanges, payment systems, cryptocurrency exchangers - accept cryptocurrency, the more convenient it is to trade with it, to select deposit and withdrawal schemes quickly and with minimal fees.
Protection against hacker attacks and stable operation of digital currency is provided by algorithms and special network nodes - miners or validators. The developers of reliable cryptocurrencies are constantly improving their projects, modifying them to meet market demands and user requirements.
In addition to the basic issues listed above for evaluating a cryptocurrency's prospects, an investor should pay attention to the factors that make digital currencies emerge as market leaders, topping the rankings.
The top 10 cryptocurrencies are digital coins with high liquidity and capitalisation, steadily rising exchange rates, and a well-developed and scalable ecosystem. The reputation of cryptocurrency developers and the transparency of their actions are not the least important. Teams of developers of major cryptocurrencies have been working in the market for years, thousands of users invest their money in their digital currencies. The share of such currencies in the total capitalisation of the cryptocurrency market is over 80%.
Cryptocurrencies that have gained the trust of the community have their positives and drawbacks.
Some investors prefer to buy newer, younger cryptocurrencies. They believe the developers have taken the shortcomings of their predecessors into account and have better adapted their digital currency to the realities of the market. So, it is worth investing in it before the rate goes up. Such a point of view has the right to exist, but for a beginner, a young cryptocurrency is an unfortunate choice.
Only proven cryptocurrencies from the top ten can provide a successful investment experience and first earnings. They all have growth potential and deserve a place in your investment portfolio. Professional crypto investors recommend creating an investment portfolio based on two or three cryptocurrencies. At least 75% of the portfolio, in their opinion, should be bitcoin.
The cryptocurrency market started with Bitcoin. Bitcoin is the most widespread, liquid and expensive cryptocurrency.
Bitcoin is traded on all cryptocurrency exchanges and the majority of calculations are based on bitcoin. All crypto investors are oriented on bitcoin. In the ten years of its existence, bitcoin's purchasing power has grown. In 2009, you might have bought two Papa John's pizzas for 10,000 bitcoins. Now, someone with that amount of bitcoin would be able to buy Papa John's brand with its entire pizza chain.
Bitcoin is widely regarded as the most trusted cryptocurrency.
Bitcoin's rise in popularity has revealed a disadvantage of the first cryptocurrency related to the algorithm's performance - poor scalability. Due to this, transactions within the network are slow and more expensive than some altcoin competitors. Bitcoin developers are aware of the shortcoming and have already introduced a solution to the problem - the Lightning Network add-on. It allows users to make unlimited micropayments. The developers are confident that the expansion of the Lightning Network add-in will boost bitcoin's capitalization and exchange rate. Analysts recommend bitcoin as a base cryptocurrency for an investment portfolio.
Ethereum is the second most capitalised and popular cryptocurrency. What makes Ethereum different from other altcoins is its ability to directly exchange digital currency into US dollars.
Ethereum cryptocurrency is part of the Ethereum system, a decentralised platform for creating financial applications based on smart contracts. Smart contracts, which are automatically executed when the terms of a contract are reached, have changed the notion of the course of financial transactions. A smart contract works like a vending machine; the service is provided after payment.
Smart contract technology is of interest to many global players. Large corporations and companies are entering into cooperation agreements with the Ethereum project team. Experts believe that in the next few years Ethereum is in a position to overtake bitcoin in terms of capitalisation and popularity. The potential for growth, backed by real projects and applications running on the platform, is a strong reason to include Ethereum in the investment portfolio.
XRP is part of the Ripple cryptocurrency platform, a project that could replace SWIFT in bank-to-bank transfers. The project team is actively promoting the platform, cooperation agreements have been signed with major payment systems, and banks in South Korea and Japan are testing Ripple's technology.
The level of capitalisation allowed Ripple to hold third place in the list of leaders for a long time. The low price makes Ripple affordable for novice investor.
The altcoins at the top of the cryptocurrency rankings deserve the attention of investors as much as the top three. Every altcoin has growth potential. A small outlay has every chance of returning with a profit. A novice investor needs to know which cryptocurrencies are worthy of a place in an investment portfolio with an eye on the future.
Litecoin is the first altcoin created as an alternative to bitcoin.
In creating the altcoin network, the developers managed to solve bitcoin's scalability problems - low transaction speeds and high fees. Litecoin is sometimes referred to as 'digital silver'.
Litecoin's capitalization is approaching $12 billion and the exchange rate has crossed the $150 per coin mark.
The creators of DASH took an original approach to the development of their project. The 10% of income from mining goes to hire qualified people to maintain the network and improve the algorithms.
DASH has a high capitalization, anonymous transactions, high level of security, clear functioning of the network. All this makes DASH an attractive project for investors.
Monero is the most anonymous and silent altcoin. It is used by those who care about remaining in the shadows, incognito.
No ASIC devices are suitable for mining Monero, which means that no more processing power can be created in the Monero network than in the case of bitcoin, 70% of whose hash rate is gathered in Chinese mining pools. Monero is easily scalable, it has no block size limit.
The Tron project aims to create a blockchain-based global entertainment network. Native cryptocurrency is used as a reward for posting and promoting content on the network.
Together with Tether, Tron has launched a new version of the USDT stabelcoin, a digital coin backed by US dollars. This has made the cryptocurrency more accessible to institutional investors. The Tron team studies and uses the positive experience of other projects, in particular Ethereum, recycling the best solutions of Vitalik Buterin's team.
The prospects and development of Tron are directly related to the prospects of the digital entertainment market.
The IOTA altcoin differs in that the network operates without commissions or miners.
The developers of the project created an autonomous network whose users confirm each other's transactions using the Tangle consensus method. The altcoin was created as a means of payment when implementing the Internet of Things concept. Experts believe that IOTA will grow in popularity as the number of IoT connections grows.
STELLAR developers read their project has the potential to improve the world's financial structure.
STELLAR is a decentralized consent platform, which can be used to make direct exchange transactions, without intermediaries like banks or other credit organizations. The developers consider cooperation with companies and large investors to be a promising way forward. The correctness of this choice is confirmed by the fact that the price of the altcoin has risen by 500% immediately after the conclusion of the cooperation agreement between STELLAR and IBM.
Cardano (ADA), which recently became the third-largest cryptocurrency project, received a boost thanks to technical solutions that users and investors alike have been waiting for.
The Mary hard fork allows Cardano to become part of the DeFi market and support the launch of tokens on its platform, similar to Ethereum. The solution has proven successful in the test net.
Glow is a programming language being developed by the Cardano team, designed specifically to meet the needs of the industry. Its advantages are:
- high-security standards;
- ease of development;
Experts believe - 2021 will be the year of mass adoption of cryptocurrency. The number of people who choose digital virtual currencies as a means of saving and a way to earn money will grow. In 2022, experts predict an increase in cryptocurrency market capitalization to $10 trillion. Knowing the outlook for major cryptocurrencies will help active investors succeed this year. However, when buying digital coins, remember that cryptocurrencies are considered a high-risk financial instrument. Don't invest more than 10% of your available cash in cryptocurrency.