Cryptocurrencies have come up as the most important financial invention in recent times. Therefore, it is an important asset for investment in today’s world. The most important question that may come to your mind as an investor is what is the best crypto to invest in? Both seasoned, as well as new investors, ask this pertinent question. We shall quickly introduce cryptocurrency before taking a deep dive into the different options that you have.
What is a cryptocurrency (as an investment)?
I assume that by now, you may have already gathered the required idea about the concept of cryptocurrency. It is a virtual currency, which works on distributed ledgers which store information regarding the transactions. Therefore, it is like a crowd-owned and crowd-managed monetary system. It has the promise of higher efficiency, speed, and reliability. In this article, we shall not look at these aspects of cryptocurrency. We shall only look at them as modes of investment.
It is forex, equity, or derivative?
As an investor, this should be the very first question in your mind. One should not invest money into anything without understanding what type of investment it is. It behaves like a currency as well as a stock. Recently, we have also seen some derivates based on cryptocurrencies. Therefore, crypto is one of the most confusing types of financial investment. An article by Financial Times speculates that it will come up as an investment class of its own.
Even before we take a look at the best crypto to invest in, let us see how it compares to some other investments:
| Investment | Risk | Common investment Period |
| Stocks | Med-High | Very short term to very long term |
| Derivatives | High-Very High | Short term |
| Forex | Med-High | Short term |
| Cryptocurrency | Very High | Short term |
| Bonds | Low to Medium | Long term |
CaseBitcoin had published a very interesting chart showing that Bitcoin gave a CAGR of almost 200% in the last decade.
In terms of return over investment, this comes to 5.2 million percent ROI. This is a crazy number. However, as you may have heard it a number of times “past performance is not a guarantee of future returns.” In the last three years or so, we have seen extreme volatility in the prices of cryptos so one should be very careful and invest only a fraction of their money into such risky assets.
“There are over 6000 cryptocurrencies (as of 2021). Which one should you invest in?”
Best crypto to invest in
- Bitcoin
Bitcoin is the world’s most common cryptocurrency. It is also one of the oldest. It is therefore the most popular cryptocurrency. Therefore, one of the advantages of this crypto is that it is too big to fail. Bitcoin should give you more reliable returns. This is the reason why some of the investors even call it the ‘digital gold’. Overall, we can safely say that Bitcoin is the best crypto to invest in, in 2021.
- Ethereum
Etherium is the largest competition to Bitcoin. Sometimes called ether. This cryptocurrency is also a popular choice among investors. There have been times when Etherium has given higher returns compared to Bitcoin. Etherium is also relatively easier to mine for people who don’t have dedicated hardware to mine cryptocurrencies. Therefore, it is also a relatively greener choice. The current market share of Ethereum is around 20%.
- Litecoin
Litecoin is also among the older players in this game. This cryptocurrency was launched in the year 2011. That was a time when the market was trying to recover from a major downturn. There are certain differences between Litecoin and other cryptocurrencies. Firstly, they created this cryptocurrency keeping in mind an open-source development atmosphere. Secondly, we can decrypt it with the help of a basic computer CPU. Therefore, it offers the advantages of speed and agility. Consequently, we can feel the difference both in terms of block creation as well as faster transaction time.
- Cardano
This is another cryptocurrency. Cardano has been created using advanced cryptography and computing technologies. In other words, developers are cryptocurrency researchers. This provides a lot of context to the Cardano cryptocurrency. This cryptocurrency has been developed, keeping in mind the needs of the users. At the same time, it has stronger security measures. Although this cryptocurrency came into the picture much later, it has quickly become one of the best cryptos to invest in.
- Dogecoin
Dodge Coin is a relatively smaller cryptocurrency in terms of market capitalization. We have included it in this list because it is also one of the fastest-growing ones. Therefore, you may expect higher volatility and risks associated with this crypto. However, if you have got a higher appetite for risk, then dogecoins could be a great fit for you. One of the interesting things about this crypto is ‘Dogeparty.’ It is an event where the Dogecoin community members burn the currency. This is done for a number of reasons but primarily to ensure that the currency supply remains balanced to maintain the value. You may read more about this on their official website at dogeparty.io
- Bitcoin Cash
In order for us to understand Bitcoin Cash, we must understand the concept of ‘hard fork.’ Hard fork refers to a divergence in the crypto rules and protocols. This creates a new cryptocurrency. There are obvious similarities between the two. However, the blocks and transactions are not valid across both of these currencies. Bitcoin Cash was started by this process, way back in the year 2017. While 2017 may seem like a few years. However, in a world where there are thousands of currencies being created every year, it is a long time. Moreover, Bitcoin Cash offers larger blocks, therefore, faster speed. It is a great alternative to the original Bitcoin for investment purposes.
- Binance Coin
Binance coin has made its mark with investors. This coin was also launched in the year 2017. This bitcoin is associated with the Binance Exchange which is one of the most used platforms based on the number of transactions. This blockchain currently retails at around $421.75 and has a high potential for growth. This coin also uses the proof-of-stake model for consensus. Overall, it has helped the investors by the expansion of the market cap to over seventy billion US Dollars.
- Polkadot
This crypto offers some unique advantages to the users. Therefore, it is also a highly valuable investment option. Firstly, as a unique feature, it offers communication with other blockchains. It has been called ‘parachain.’ These offer communication protocols that allow communication with one another. However, there are other parts of this process like Relay chain, Threads, and Parathreads. This allows another benefit. Polkadots can add major updates without the need for hard forks. This may go a long way in solving one of the ethical issues of technology.
- Tether
If you are worried about the volatility in the cryptos, then tether could be a safer bet for you. This is one of the best cryptos to invest in because of its relative stability. Tether is theoretically ‘tethered’ to the US Dollar. Secondly, it is a cryptocurrency that is backed by regular or fiat currencies. This enhances the investor trust in the crypto. This offers easy to exchange to and from other currencies as well. Some users are still less comfortable with the crypto exchanges. They will feel more secure about Tether as it offers easy transactions.
- 1inch
Most of the new cryptos offer some innovative features. In this regard, 1inch also deserves perusal. They use a virtual balance system, which enhances reliability. Secondly, they also offer a way to park your Etherium coins. Once you park them into their DEX platform, you can earn interest on these coins. The interest is paid in the form of 1inch coins/tokens. This type of generation of the coin has been termed ‘liquidity mining.’