Investing is one of the most important things you can do for your financial future – it can be both rewarding and unsettling, especially with so many options to explore and a seemingly endless amount of information to consider. Where to begin? That can be ambiguous, but with a bit of knowledge and careful planning, anyone can start building a solid foundation for their financial future through investing.
In recent years, the growth of the internet, technological advancements, and the advent of cryptocurrencies have revolutionized investment perspectives and introduced several distinctive elements. Before we get into the details of crypto investing, let’s start with the fundamental of cryptocurrencies.
Overview of Cryptocurrencies
Cryptocurrencies are digital or virtual currencies that use cryptography for secure financial transactions. They operate on a decentralized platform (the blockchain), meaning any government or financial institution does not control them.
The first cryptocurrency, Bitcoin, was created in 2009 and designed to be a peer-to-peer electronic cash system allowing online payments to be sent directly from one party to another without third-party interference. Cryptocurrencies use blockchain technology, a decentralized, highly secure, and tamper-resistant ledger that records transactions across a network of computers.
Furthermore, various cryptographic techniques help to ensure the security of transactions and the integrity of the blockchain. These techniques include the use of public and private keys for authentication, as well as hashing algorithms to ensure the integrity of the data in the blockchain.
Typically, cryptocurrencies can either be coins or tokens. Coins like Bitcoin, Ethereum, BNB, Solana, and TRON are standalone currencies that leverage their own native blockchain and can be used as a form of payment or store of value. Altcoin is a term you may have come by or will after now – it refers to other coins except Bitcoin.
On the other hand, Tokens are built on top of an existing blockchain and represent a specific asset or utility. Some examples of tokens include Tether (USDT), Binance USD (BUSD), Dai, and USD Coin (USDC) – which are stablecoins pegged to the value of a specific fiat currency like the US dollar. Coins or tokens can be stored in virtual wallets.
Do you want to know more about cryptocurrencies, blockchain, DeFi, and more? Check out our Crypto 101 guides.
Is Cryptocurrency a Good Investment?
Is it smart to invest in cryptocurrency even though investors typically lose most, if not all, of their money to fraud schemes? Would a wise investor still consider investing in the market despite the incredible volatility seen so far and stories of cryptocurrency millionaires making or losing millions overnight?
The volatility and negativity won’t go away, but the potential for huge returns is undeniable. Here are reasons why cryptocurrency may be a good investment:
Potential for high returns on investment: Some cryptocurrencies have provided very high returns for investors in the past, and they may continue to do so in the future.
Decentralization: Cryptocurrencies are decentralized, meaning they are not controlled by any government or financial institution. This can make them more resistant to censorship and fraud.
Growing adoption: Cryptocurrencies are becoming more widely accepted as a legitimate form of payment, which could lead to increased demand for them and potentially higher prices.
All good reasons, right?
Remember that the value of cryptocurrencies can change drastically over short periods; hence you could lose all or a sizable portion of your investment. As a result, before deciding whether to invest in cryptocurrency, carefully consider your financial situation and risk tolerance.
You Should NOT Invest in Cryptocurrency If…
You are ill-informed
Cryptocurrencies undoubtedly offer many benefits but are also perceived as a bubble waiting to implode due to unprecedented volatility. The entire concept of cryptocurrencies can be complex and confusing for those unfamiliar with them. In most cases, it is more speculating than investing, and timing is a huge factor.
With some great news or positive sentiments in the market, the price of Shiba Inu, for instance, can rise astronomically. On the other hand, mere rumors or a tweet can cause the token to lose all the gains accumulated over weeks and months in just a few hours. If you don’t fully understand how cryptocurrencies work and just looking for quick profits without grasping the idea of the ecosystem, you should avoid crypto investments.
You Think it Guarantees Long-Term Profits
Quick disclaimer: specific cryptocurrencies, such as BTC, have yielded massive ROI over long periods. Investors who bought into Bitcoin after its launch in 2009 and held the asset for about 11 to 12 years would have made a jaw-dropping profit of over 17 million percent.
On the flip side, those who purchased BTC at any point in 2021, hoping that the coin would push for $100K, will have a different opinion about the long-term profitability of the coin. This is just one scenario; several other crypto projects pumped in the first few weeks of launch, and 4+ years down the line, investors are yet to recoup their capital, not to mention taking profit.
What’s the bottom line? Despite the growing popularity, cryptos are yet to prove themselves as viable long-term investments, in contrast to stocks with a long-standing history of profitability. Gold, for instance, has proven to be a reliable custodian of value for centuries, but cryptocurrencies? No one can tell what the future holds. In other words, there are no guarantees in the long term, and you must be brave to explore these uncharted waters.
You Are Not Aware of the Security Vulnerabilities
Like all digital assets, cryptocurrency is prone to various security vulnerabilities.
- Hackers can target exchanges or wallets, where cryptocurrencies are stored, and steal funds.
- Cryptocurrencies can be vulnerable to “phishing” attacks, in which a perpetrator creates a fake website that looks like a legitimate cryptocurrency exchange or wallet and tricks users into entering their login credentials, allowing the perpetrator to steal their funds.
- Cryptocurrencies can be vulnerable to “fake staking” attacks, in which a perpetrator creates many fake cryptocurrency addresses to inflate the balance of a staked cryptocurrency falsely.
- Cryptocurrencies can be vulnerable to “51% attacks,” in which a group of miners control more than 50% of the computing power on a cryptocurrency’s network and can potentially reverse transactions or double-spend coins.
It’s not all bed of roses with crypto investing. Hence, if you are unaware of the potential vulnerabilities and how to avoid them, you are better off not sticking your funds in.
Is Cryptocurrency a Safe Investment?
So, you are thinking, “Is cryptocurrency safe?”
Like any investment, investing in cryptocurrency carries some level of risk. The value of cryptocurrencies can fluctuate significantly, and you may lose all of your investment. Additionally, the industry is still growing, and there is a lack of regulation, making it more susceptible to fraud and other criminal activity.
However, many people believe that cryptocurrencies have the potential to be a safe and lucrative investment. There are some steps you can take to reduce the risk of investing in cryptocurrencies. For example, you should thoroughly research the specific cryptocurrency you are considering investing in and the company or organization behind it. You should also diversify your portfolio by investing in various assets rather than just one.
Whether cryptocurrency is a safe investment depends on your individual risk tolerance and investment goals. Before making any investment decisions, it is essential to consider all potential risks and rewards.
How Many Categories of Cryptocurrency Are There?
We have established that cryptocurrencies can either be coins or tokens. In addition, they can be placed into these categories:
- Utility tokens: These are tokens that grant access to a specific product or service.
- Security tokens: These are tokens that represent voting rights or ownership in a company or asset.
- Payment tokens: These are tokens used for settling the purchase of goods or services in or out of their native platforms.
- Exchange tokens: These are tokens that are native to an exchange, e.g., Binance Coin, KuCoin, CRO (Crypto.com’s token), etc.
- Stablecoins: These are cryptocurrencies pegged to the value of a specific asset, like a fiat currency or commodity.
- Non-fungible tokens (NFTs): These are unique tokens that represent a one-of-a-kind asset, like a digital collectible or artwork.
- Decentralized Finance (DeFi) tokens: A DeFi (decentralized finance) token is a digital asset that facilitates transactions on a DeFi platform.
- Privacy tokens: These tokens allow users to transact without revealing their personal information or transaction history to the public. Some examples of privacy tokens include Monero (XMR), Zcash (ZEC), and Dash (DASH).
- Asset-Backed tokens: These are digital tokens backed by a physical asset, such as real estate or commodities like gold or oil. They represent ownership in the underlying asset, and their value is tied to the value of the asset.
What Are the Most Widely Accepted Types of Cryptocurrency?
Cryptocurrencies have continued to grow in popularity, and the number of cryptocurrencies (coins & tokens) on the market today is more than 22,000. Here are the most widely accepted types of cryptocurrency.
- Bitcoin (BTC)
Bitcoin, often referred to as “digital gold,” was created in 2009 and is by far the most widely accepted type of cryptocurrency, with a market capitalization of over 300 billion USD. The coin is widely accepted because it is the first and most well-known cryptocurrency and has a large and active user base. BTC is also widely accepted because it has a relatively high level of liquidity, meaning that it is relatively easy to buy and sell on exchanges.
Bitcoin has a limited supply, with a maximum of 21 million bitcoins that will ever be created. This limited supply, along with increasing demand for bitcoin, has helped to drive up the value of the cryptocurrency over time. BTC was initially intended to be used as a currency that could be bought and sold anonymously online, but it has since become more popular as an investment tool than as a currency itself.
- Ethereum (ETH)
Ethereum is another type of cryptocurrency that is widely used across the globe. Ethereum was created by Vitalik Buterin in 2015, who also created its underlying blockchain technology called “smart contracts,” which allows users to build and deploy decentralized applications, or “dApps,” on the network.
These dApps can be programmed to automatically execute specific actions when certain conditions are met. For example, a dApp could be programmed to facilitate the exchange of a digital asset like ETH or to represent a financial contract like a loan agreement. These characteristics make Ethereum attractive to a wide variety of users and have contributed to its widespread acceptance.
The native token of the Ethereum network is called Ether (ETH). Ether is used as a digital currency and also as a form of payment to compensate network participants for their computational efforts. ETH is the second-ranked cryptocurrency with over 150 billion USD in market capitalization.
- Tether USD
USDT (Tether) is a cryptocurrency meant to be a stablecoin, meaning that its value is supposed to be pegged to the value of a specific asset or group of assets. In the case of USDT, the asset it is pegged to is the USD. The idea is that one USDT should always be worth approximately one USD, making it a stable store of value. This is particularly attractive to users who want a store of value that is more stable than other cryptocurrencies, which can be very volatile.
Tether USD (USDT) is widely accepted because of its wide adoption, especially on cryptocurrency exchanges. USDT is often used to store and transfer value between exchanges, allowing traders to move funds between exchanges without actually transferring the underlying assets. This can be more convenient and faster than transferring assets directly, especially when the assets in question have low trading volume or are difficult to transfer for other reasons.
Which Cryptocurrency is the Best to Invest In?
Given that the cryptocurrency market is still in the bear season at the time of writing, it seems like a good time to buy into solid crypto projects at a significant discount. Large market cap coins like BTC and ETH have lost over 75% from their all-time highs, which means that the current price of these assets could be an attractive entry point for you and an avenue to diversify your portfolio.
Here are some of the best cryptos to buy in 2023, based on the current market cap, upside potential, prior all-time highs, and ecosystem developments.
- BTC – Selling At a Huge Discount
With the most market capitalization and widest adoption among crypto assets, Bitcoin tops the list of crypto assets to invest in 2023. In 2021, BTC experienced a protracted bull market that ended when the digital currency surpassed $69,000 in November of that same year. To think that the asset’s price was below $1 in 2009 exemplifies its potential for high returns.
At the time of writing this piece, BTC is trading between $16.9K and $17.4K. Comparing the asset’s current price to its current ATH offers investors and traders a whooping discount of about 75%. According to BTC price predictions, Bitcoin is expected to recapture the $60K mark by 2025 – an upside of over 230%. At this point, you are probably asking yourself, “How much should I invest in Bitcoin?” Invest only as much as you can afford to lose because you are not guaranteed to make gains.
- BNB – The Native Token of the Binance Ecosystem
Given the current value of BNB, this could be one of the best cryptocurrencies to put money into in 2023. BNB is currently trading between $275 to $285, and BNB price predictions expect the token’s market value to reach $600 in 2023 for the first time since its ATH of $690.93 in May 2021. Now might be a good time to buy at a 60% discount.
BNB is the native token of the Binance ecosystem, the largest peer-to-peer crypto exchange by trading volume. BNB was founded in 2017 with the intention of offering low-cost trading fees to users of its exchange. Binance has since developed a plethora of products and services, many of which provide supplementary use cases for BNB, thereby expanding the utilization of the token.
To compete toe-to-toe with legacy blockchains, the Binance team developed the Binance Smart Chain and ensured that projects listed or to be listed on the chain are paired against BNB, and all transaction fees are settled in BNB. This is similar to the case of the Ethereum blockchain, where ETH is also paired against projects and used as a settlement for transaction fees to ensure that the coin has real-world applications and remains in demand. Given the fundamental of BNB and the ongoing developments in the ecosystem, BNB is poised to be an excellent long-term investment.
- ETH – Invest in the Smart Contracts Blockchain
Ethereum (ETH) is more than just a digital currency; it has one of the largest and most active developer communities in the cryptocurrency space. This is important because the success of the blockchain is largely determined by the quality and quantity of applications built on top of it. The Ethereum network hosts thousands of projects (including metaverse projects) and their ERC-20 tokens, highlighting its legitimacy.
When tokens are transferred on the network, fees are settled in ETH, ensuring the coin has real-world utility and, thus, increased demand from the broader crypto markets. In addition, the Ethereum Foundation is actively researching and developing Ethereum, including working on scaling solutions such as Ethereum 2.0. This research and development will likely lead to improvements in the Ethereum network, which could increase the value of ETH.
ETH is trading at 60% less than its all-time high from the 2021 bull market. ETH price predictions project a maximum value of over $2000 in 2023 and a return to its ATH by 2026. With the Ethereum Proof-of-Stake migration, the community can expect more scalability, lower fees, and faster transaction speeds, all poised to drive up the demand and price of ETH.
The list of crypto projects above is by no means exhaustive. Other projects include XRP, Uniswap, Shiba Inu, AVAX, SOL, etc.
What Cryptocurrency Is the Best for a Long-Term Investment?
There are thousands of crypto assets, some worth more than others. To find out which ones are best for long-term investment, we need to look at what makes them attractive as investment assets.
The most important thing is the demand for the currency. The more people want to use it, the higher its value will be. This is called the “network effect,” and it’s why Facebook or Uber are so valuable—they have many users, so they can charge less than competitors who don’t have as many users.
Another vital factor is liquidity—this means you can easily convert your cryptocurrency into real-world money like U.S. dollars or GBP if you want to spend it on something else besides cryptocurrencies themselves (like buying groceries). You also want to look at the market capitalization of the coin or token, potential upside based on history, long-term project goals, and current pricing regime (is it undervalued?).
The assets that checkout these criteria include Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Avalanche (AVAX), Cosmos (ATOM), Polygon (MATIC), and Cardano (ADA), to mention a few. Ultimately, it’s important to consider your investment goals and risk tolerance before deciding which cryptocurrency to invest in.
How to Determine Which Cryptocurrency Is the Smartest Investment for YOU
You are probably already asking yourself, “Should I invest in crypto?” Take a breather; let’s walk you through something essential – finding the best crypto investment for you!
Here are some factors to consider when looking for the best cryptocurrency investments:
Step 1: Know the Team
Research the team behind the cryptocurrency to make sure they have the necessary expertise and experience to develop the coin successfully.
Step 2: Investigate the Use Cases
Look for cryptocurrencies that are actively being developed and have a clear use case. This might suggest that the coin has a chance of long-term success rather than just being a shitcoin for pump-and-dump schemes. It is most likely a hype coin if it has no particular use case(s).
Step 3: Ascertain the Liquidity
Ensure that the coin or token is traded on a large exchange with high liquidity, making buying and selling the coin easier. If the liquidity is low, it becomes difficult for you to trade in exchange for other crypto assets.
Step 4: Know if Market Capitalization is High
Investing in cryptocurrencies with a high market capitalization is generally a good idea because these assets are more stable and have a higher adoption rate.
Step 5: Determine if the Community is Active
Look for cryptocurrencies with a strong and active community, which can indicate the coin’s popularity and potential for growth.
Should You Invest In Cryptocurrency Today?
Investing in cryptocurrency is a high-risk, high-reward proposition. Before investing in cryptocurrency, it’s crucial to understand how it works, the risks involved, and the potential rewards. One of the key features of cryptocurrency is that it is highly volatile, meaning that the value of a currency can fluctuate dramatically in a short time. This can be both a risk and an opportunity, as prices can rise or fall significantly quickly.
In addition to volatility, there are also risks associated with security, regulatory, and market-related issues. For example, the value of a cryptocurrency can be affected by a hack or a change in regulations, and the market for a particular cryptocurrency may be relatively small and illiquid, making it more difficult to buy or sell large amounts of the currency.
That being said, if you’re willing to accept the risks, there are also potential rewards to investing in cryptocurrency. Some people believe that cryptocurrency has the potential to disrupt traditional financial systems and that it may become a widely accepted form of payment in the future. Additionally, because there is a finite amount of many cryptocurrencies, some investors believe that the value of these currencies will increase over time as demand for them grows.
Looking at the price of assets on the market today, it could be a great time to diversify your portfolio by adding some crypto. Most coins or tokens are available at a massive discount, and buying now presents an opportunity for enormous ROI or depreciation of your capital if the market continues to trend downwards. In short, Investing in cryptocurrency is a highly speculative investment. So, if you want gains, you should also be prepared for losses.
To help manage your investment decisions, it is vital to understand the concept of crypto investing. The market is complex and highly volatile, and it can be challenging to navigate without proper knowledge. But, just like any market, crypto can be understood and guided with the right information and resources.
If you’re interested in investing in cryptocurrency but need help figuring out where to start, we recommend reading through our Guides which are simplified to help you better understand the crypto market and be more prepared to navigate it.
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