A Neophyte’s Guide to Cryptocurrency, the New Currency
What is cryptocurrency? You may have been hearing this term a lot these days but don’t fully understand what it is exactly and how to invest in it. If it sounds so cryptic and overwhelming to you, do stick around as we give you a rundown of this new currency. With the weakening of some currencies, particularly in Asia, especially against the U. S. Dollar, many people are probably looking into other possible investments. A weak currency may signify a weak economy, and pulling out stocks in favor of bonds and other low-risk options might be more viable. In any case, exploring various alternatives might be prudent. As they say, don’t put all your eggs in one basket. Thus, if you are considering diversifying your portfolio, we’ll provide the best Cryptocurrency to invest in.
What is Cryptocurrency?
Cryptocurrency is a digital, encrypted, and virtual money that is secured by blockchain technology. You might already be familiar with Bitcoin, the first and most popular cryptocurrency in circulation, but there are already more than 19,000 cryptocurrencies. Unlike traditional or fiat currency, which is managed by a government entity much like the U.S. Federal Reserve, cryptocurrency is decentralized and uses a peer-to-peer system in transactions. Although most individuals invest in cryptocurrencies the same way they would in other assets like stocks or bonds, you can also use cryptocurrency to purchase conventional goods and services. Cryptocurrency is a new and fascinating asset class, but do your homework first before investing, as it is highly risky and volatile. Make sure you exercise due diligence and thoroughly understand how each system operates, as you wouldn’t want to see your hard-earned money going down the drain. For a more detailed analysis on Cryptocurrency, I highly suggest going over Kaspersky’s website, as they have a comprehensive guide for beginners.
What are the Advantages and Disadvantages of Cryptocurrency?
The Motley Fool lists the pros and cons of investing in cryptocurrency.
Advantages:
- Diversification: It is not in correlation with asset classes such as equities, debt, and money market instruments.
- Return potential: It has the potential for high returns; most investors would say it is even higher than stocks.
- Additional utility: You may also use it to purchase goods and services.
Disadvantages:
- Limited regulation: As it is purely digital, it has a high risk for hackers, scammers, and fraudsters.
- High volatility: It relies on supply and demand, and prices can fluctuate significantly on a daily basis.
What is the Best Cryptocurrency to Invest in?
Forbes determines the 10 best Cryptocurrencies to invest in 2022, and we’ll focus on three that are good for beginners:
1. Bitcoin (BTC)
Market cap: Over $846 billion
Bitcoin has the advantage of being the original cryptocurrency, developed in 2009 by Satoshi Nakamoto (just his pseudonym). BTC operates on a blockchain, which is a ledger that records transactions, shared by a network of thousands of computers, much like majority of cryptocurrencies. It is maintained secure and protected from defrauders because updates have to be validated by cracking a cryptographic puzzle, a procedure known as proof of work. It has a growth of almost 7,800%, as you can buy Bitcoin for about $500 in May 2016, but as of March 1, 2022, you can buy it for over $44,000!
2. Ethereum (ETH)
Market cap: Over $361 billion
Programmers have a preference for Ethereum because of its potential uses, including “smart contracts” that immediately carries out when certain conditions are met and non-fungible tokens (NFTs). It is not only a cryptocurrency, but also a blockchain platform. Ethereum has also grown incredibly fast. Its price increased by more than 27,000% from roughly $11 to over $3,000 between April 2016 and the beginning of March 2022. It is a great choice for beginners.
3. Cardano (ADA)
Market cap: Over $33 billion
Cardano is noteworthy for adopting proof-of-stake validation early despite entering the crypto industry later. By eliminating the cutthroat, problem-solving part of transaction verification found in systems like Bitcoin, this approach increases transaction speed, reduces energy consumption, and has a smaller negative impact on the environment. It works similarly to Ethereum; it empowers smart contracts and decentralized applications using ADA, its native coin. Its growth is comparatively moderate compared to other cryptocurrencies, seeing a 4,850% increase. Its cost in 2017 was $0.02, and on March 1, 2022, it was $0.99.
Conclusion
There you have it, our brief overview of the best Cryptocurrencies to invest in. As you have probably concluded by now, cryptocurrency is not for everyone. If you are more of a conservative investor, then this might not be the type of investment you are looking for. However, if you consider yourself a risk-taker, the high potential for returns might be worth it. Should you opt to invest in this new type of asset class, you should thoroughly investigate your choice before purchasing. Pay close attention to transaction costs because they might vary greatly between different currencies. Since the industry is developing at a rapid pace, it’s crucial to keep track of any new events that can have an impact on your investment. Lastly, given its risky nature, be mindful not to invest more money than you can spare to lose.