Are you planning on investing in cryptocurrencies this year? With only 5000 of them out there choosing in which cryptocurrencies to invest is not an easy task.
Why Invest in Cryptocurrencies?
- Diversification. The large number of cryptocurrencies on the market, ensures portfolio diversification in order to minimize risks.
- Transparency. All transactions in the blockchain can be traced and can be available to anyone around the world.
- Low fees. Digital currencies offer much lower fees compared to traditional investment assets.
- Protection from governments and central bankers. Central bankers and governments cannot interfere or manipulate cryptocurrencies, as they do with fiat currency. Furthermore, Uncle Sam cannot seize your bitcoins from your wallet against your will.
- Anonymity. Cryptocurrency transactions are available on the blockchain but, cryptocurency owners are not identifiable.
- Liquidity. You can buy, trade and cash out your assets, any time as cryptocurrency exchanges are open 24/7.
What are Cryptocurrencies?
Cryptocurrencies are a non tangible-digital form of money. They are designed to function as a medium of exchange. (money) Cryptocurrencies use strong cryptography and blockchain technology, to secure financial transactions. Most cryptocurrencies are decentralized networks outside of government and central bank control.
Cryptocurrency Market Overview
Bitcoin continues to lead the cryptocurrency market in terms of market capitalization, popularity and user base. 2020 is expected to be a good year for Bitcoin. The bitcoin mining will be halving production in May. That means less Bitcoins around but the same Bitcoin demand.
In addition, cryptocurrencies are now available in India due to a supreme court decision. That means cryptos will now be available to millions of people.
But there is more good news for cryptocurrencies. The Fed is already researching the use of digital currency and is being advice to examine the possibility of developing a digital dollar. Japan, Russia, England, China, Sweden, and Ukraine, are some of the countries looking to develop their own blockchain technology.
What to Consider Before Investing in a Cryptocurrency
The cryptocurrency index is the most volatile and can change drastically within a few weeks. Thus, you shouldn’t pay much attention only to the current rate of cryptocurrencies. It is necessary to consider the following.
Market capitalization. It is the total dollar market value of all issued coins. A high market capitalization suggests there is a large volume of the cryptocurrency participating in active transactions. It is a sign of the cryptos popularity.
Liquidity. The crypto you are willing to invest should have a high liquidity level. Liquidity level shows how fast a cryptocurrency can be sold at the market price.
Do your own research. You should not follow the recommendations of one source of data. On the contrary, always use several sources (financial expert’s opinions, forums, brokers etc) and do not place the whole of your investment into one cryptocurrency. You do not want to lose your money after the first failing deal.
Bitcoin is the king of all cryptocurrencies. At the moment over 65% of the money invested in cryptos are invested in Bitcoin. Its price is reasonable now and the production halving in May will see reduced availability against increased demand. Bitcoin uses the “Proof of Work” system. In this system miners are rewarded with bitcoin for mining and approved transactions. There is a limit of only 21 million Bitcoins to be mined. When that number is reached, bitcoin’s production will stop. In my mind, bitcoin is a must when investing in cryptocurrencies.
- Bitcoin price $7184.95B
- Market capitalization $131.71B
- Liquidity $255.04M
Ethereum is the first bitcoin alternative. It is a decentralized currency and is perhaps the most widely used altcoin. Right now Ethereum’s market capitalization is roughly 1/10 the size of bitcoin’s. Ethereum’s success could depend on upcoming updates and rapid implementation of the “Proof of Stake” algorithm. The “Proof of Stake” system, uses an algorithm to reward users who participate in the production process of cryptocoins. Ethereum’s goal is to be “the world’s computer” a very ambitious goal.
- Ethereum price $181.67B
- Market capitalization $20.043B
- Liquidity $114.23M
Litecoin is a currency that cannot be ignored. It was release in 2011 by Charlie Lee, a google employee and former engineering director at Coinbase. Litecoin like Bitcoin, uses a “Proof of Work” algorithm to produce coins. When it comes to payments, Litecoin is one of the most affordable and fastest cryptocurrencies compared to Bitcoin and Ethereum. Litecoin offers great potential and affordable price.
- Litecoin price $42.69
- Market capitalization $2.767B
- Liquidity $33.331M
If you think Bitcoin offers you privacy, then think again. Even though is hard, there is still a way for banks and governments if they want, to track down certain cryptocurrency owners. Zcash offers true privacy to the traders. The technology it uses is more advance even than Bitcoin’s. Through its technology Zcash ensures total security and privacy. Zcash like Bitcoin has a limit of 21 million coins. If Bitcoin continues to develop positively, chances are for Zcash to follow.
- Zcash price $41.79
- Market capitalization $373.75M
- Liquidity $6.1627M
Ripple is a real time global network that offers fast, low cost, and definite global payments. Ripple has been adopted by companies such as UniCredit, UBS, Santander, Akbank, Axis Bank, BBVA, Yes Bank and so on. Its success with the financial sector is due to the fact that Ripple enables banks and financial institutions, to settle cross border payments in real time with end-to-end transparency and all of that at a very low cost. Ripple does not require mining. Released in 2012 the network can operate without the Ripple company. Among Ripple validators are companies, internet providers and the Massachusetts Institute of Technology. Financial institutions and banks acknowledge Ripple as a system with several advantages over other cryptocurrencies like Bitcoin.
- Ripple price $0.191074
- Market capitalization $6.1265B
- Liquidity $29.2464M
Tezos was developed by ex-Morgan Stanley analyst Arthur Breitman. Although it has gone through some difficult times, each time bounced back stronger than ever. It has gained a strong position in the market by establishing itself as a competitor to Ethereum. It is a decentralized digital currency, with a self-upgrading blockchain technology. Tezos operates the “Proof of Stake” system.
- Tezos price $2.14
- Market capitalization $1.4976B
- liquidity $6.5977M
Stellar was introduced in 2014. It is a decentralized consensus platform. It is designed to support all kinds of currencies, dollars, euros, pesos, yuans, yens, and so on. It is one of the most affordable cryptos to invest. Launched with a network consisting of 100 billion Stellar tokens that are now called Lumens or XLM tokens. XLM is designed as an intermediary when international transactions take place. Thus, sending money in USD and then receiving it as EUR, is possible because of the Stellar network. Stellar could be a long term investment.
- Stellar price $0.049353
- Market capitalization $1.0032B
- Liquidity 5.3047M
Dan Larimer created EOS. It was launched in 2018 and it is designed after Ethereum therefore, it offers a platform in which developers can build decentralized applications. If Amazon, Twitter and Uber decide to move to blockchain, that blockchain will definitely be EOS. The EOS system is free of Ethereum problems, with scalability and ready to replace other competitive blockchains. EOS operates on a revolutionary delegated “Proof of Ownership” system. The EOS platform claims to eliminate transaction fees and also conduct millions of transactions per second.
- EOS price $2.67
- Market capitalization $2.4983B
- Liquidity $31.055M
9-BAT-Basic Attention Token
- BAT price $0.167626
- Market capitalization $244.39M
- Liquidity $1.5745M
According to my research, these nine cryptos could be a good investment in 2020. However, there are thousands of cryptos out there, which means there are definitely more cryptos worth investing, it is impossible to cover them all.
If you are willing to invest in cryptos remember the crypto market is unstable and volatile. You need to do your own homework and research. Do not afraid to contact financial experts and ask for their opinion. If you decide to go ahead and invest, my advice would be not to place all your money in only one cryptocurrency.
It could be worthwhile to join crypto-communities. That way you can interact with people deeply involved in the niche and explore opinions. Facebook hosts some great communities there, feel free to join in and ask your questions.
If you are serious about crypto investing and at the same time you own more than $500 in cryptos, best is to purchase a hardware wallet. It is of vital importance to secure your investment.