Cryptocurrency exploded in popularity over the past few months and is the hottest new trend in the investing world. It’s possible to make a lot of money investing in cryptocurrencies, but it’s also possible to lose a lot of money. By investing now, you could potentially make a lot of money as cryptocurrencies become more widely accepted. But there are plenty of risks involved in investing in cryptocurrencies as well.
Risks of investing in cryptocurrency in 2021?
Twelve years after the creation of the world’s first cryptocurrency, bitcoin, regulating the asset is still complicated in most countries. No matter how popular cryptocurrencies become among investors, they can’t succeed over the long term if they’re not widely accepted by merchants.
- Technological risk
The risk of a bug in the Bitcoin protocol’s software is low but higher for other currencies.
Cryptocurrencies can be incredibly volatile, which adds to their risk. Bitcoin, for example, has lost more than 80% of its value in the past, and it is experienced multiple significant falls over the past few months.
Investing in cryptocurrencies is a risk that can bring profit, but also loss, so the quality is up to the individual. In any case, if someone decides to invest, it is necessary to make sure that they understand all the risks, and above all the risk of permanent loss.
What crypto to buy?
According to Yahoo Finance, Top 10 Growing cryptocurrency in 2021 are
1. Binance: +777.39%
2. Dogecoin: +700%
3. Cardano: +616.7%
4. Polkadot: +380.63%
5. Stellar: + 307.69%
6. Chainlink: +192.5%
7. Ethereum: +168.36%
8. Tezos: +166.5%
9. Vechain: +150%
10. Bitcoin: +95.21%
If you do choose to invest in cryptocurrency, choose your investment wisely. Right now, there are more than a thousand cryptocurrencies in the market to make choice. So, how can you make a smart decision?
Bitcoin has seen its fair share of volatility over years, and prices have pulled back since recent highs, but being the biggest name in crypto gives it a worldwide acceptance that lesser-known rivals don’t have. Bitcoin is by far the most popular cryptocurrency, but it’s not the only option.
One cryptocurrency that has gained a huge following since its launch in 2015 is Ethereum (known as ETH). Ether has become one of the most popular cryptocurrencies in the world, with a market cap of more than $400 billion.
When it comes to DOGE, investors are divided. Either the coin will go to the moon, thanks largely to Musk, or it is nothing more than a bubble that will prove to be a huge disappointment once it bursts. Some market participants are taking the middle ground, suggesting that DOGE will evolve into something more like a stable coin once it reaches a certain point.
One of the best-performing cryptocurrencies in the market is Cardano. For starters, the company’s enterprise platform lays out how Cardano is building a platform to accommodate usage in education, retail, finance, and healthcare. These industries face a common thread that pulls back from operating efficiently. And that is they have a high degree of centralization.
Binance Coin was launched in 2017 by the world’s largest cryptocurrency exchange by volume, Binance. The coin can be used to pay transaction fees on the Binance exchange or to just simply trade for other cryptocurrencies.
Stick with well-known, regulated exchanges such as Coinbase, Kraken or Binance, to buy and hold crypto investments — at least to begin with.
What are the fees?
If you want to buy cryptos — and sell them again — there will be several fees, such as:
- transaction fees
- deposit fees
- withdrawal fees
- trading fees
- escrow fees
These usually cost a few percent of the total transaction value.
Types of Cryptocurrency Wallets
You will need a wallet. A cryptocurrency wallet is a software program that stores the private and public keys that connect you to the blockchain where your cryptocurrency exists. Wallets don’t store your cryptocurrency but enable you to access it on the blockchain with your public key (your “cryptocurrency address” that the other party in the transaction sees) and private key (known only to you). You must have both to complete a transaction. They’re called “keys” because they’re used to unlock your cryptocurrency on the blockchain.
There are several different types of digital wallets:
- Desktop wallets are installed on your personal computer. Since storage is on your computer, the information is safer than with online wallets.
- Online wallets are on the cloud and can be accessed from any computer. They’re more convenient to use, but your private key is stored online and controlled by a third party. This makes them less secure.
- Mobile wallets. As the name implies, this type of wallet is an app on your smart device. They have the advantage of being able to be used to make purchases where various cryptocurrencies are accepted.
- Hardware wallets. These store your private key on a hardware device, such as a USB device. They’re more secure because the private key isn’t stored online, where it could be accessed by unauthorized parties. They also let you access your cryptocurrency from multiple devices.
As for when to invest, experts advise against trying to time the market or buying a certain token just because the internet is buzzing about it. (FOMO is not a good investment strategy). Instead, many recommend the dollar-cost averaging tactic, which entails buying smaller amounts at regular intervals over a set period.
There has been an escalation in cryptocurrency investments in recent months. Investors are always looking for the next big thing, or something even more valuable than Bitcoin. It’s popular to look at cryptocurrency market performance and market dynamics to figure out which cryptocurrency is the best to invest in in 2021. But the price isn’t the only factor to consider. Investors should take a closer look at the digital currency’s functionality and adoption rates. If a cryptocurrency is useful, it can overcome many barriers.
As with any investment, do your due diligence and don’t pin all your hopes on one company or one cryptocurrency: spread your money around so you spread the risk and only invest what you can afford to lose.
By investing now, you could potentially make a lot of money as cryptocurrencies become more widely accepted. Just be sure you’re only investing money you can afford to lose.