Selecting the best cryptocurrency to invest in 2021 can be a difficult choice. There are thousands of cryptos out there right now, many of which claim to offer advanced solutions to modern-day problems, which, if true, would likely lead to growth in their prices.
There are also coins that have already established themselves, like Bitcoin and Ethereum, and the entire DeFi sector that exploded in 2020. To help out, we have done our due diligence, and will now give you reliable evidence and recommendations for what we believe to be the best cryptocurrency investments in 2021.
Our Top Picks of the Best Cryptocurrencies to Invest In
Bitcoin (BTC) is the world's first and still largest cryptocurrency. It was launched on January 3rd, 2009, by an unknown individual or team known as Satoshi Nakamoto.
In years that followed, Bitcoin's price has been growing gradually, and in 2017, it reached the price of $20,000. This former record was finally beaten in late 2020, with the new record at the time of writing (January 27th, 2021) being $41,941.
While Bitcoin's scalability issues are a problem for the coin to become the biggest crypto used for payments, its other attributes — like a limited supply, decentralization, high security, well-known brand, and more — make it a good candidate for the future store of value.
Ethereum (ETH) is the second-largest cryptocurrency by market cap, bested only by Bitcoin. Ethereum is also probably the second-most important crypto project ever to emerge, as it changed the way people think about and use the blockchain — cryptocurrency's underlying technology.
Apart from simply processing transactions, the blockchain can store vast quantities of data, and be used for a variety of other use cases. Ethereum pointed towards this nearly-limitless potential by providing smart contracts, dApps, the DeFi (decentralized finance) sector, and more. It is a development platform, whose coin, Ether (ETH), has massive potential to see a price surge.
Tether (USDT) is a cryptocurrency known as a stablecoin. Basically, it is a coin that is not troubled by volatility and constant price changes like other cryptos. It is pegged to the US dollar, and each USDT coin is backed by $1. As such, Tether is not a good investment for those looking to earn from the price changes.
However, it is a great cryptocurrency to preserve wealth when the price of other coins start to drop. Indeed, many traders sell their Bitcoins for Tether instead of selling it and withdrawing USD. That way, their money can be safe from volatility and remain at hand for when a new opportunity arises.
Uniswap (UNI) is currently the 13th largest cryptocurrency, which is quite an achievement, given that it has only been around for a few months. Uniswap is actually a project based on Ethereum's network, and it quickly rose through the ranks to become the world's largest decentralized exchange (DEX).
Cardano (ADA) is a project by Charles Hoskinson — a well-known developer who has worked on several other major projects in the past. Cardano has always chosen a slow and steady path to its goals, focusing on development in doing things right, as opposed to rushing through updates to catch emerging opportunities.
This patient and responsible approach took it to the position of the 6th-largest cryptocurrency.
6. Binance Coin
As the name suggests, Binance Coin (BNB) is a cryptocurrency created by the world's largest crypto exchange by trading volume — Binance. Over the last several years, Binance expanded its ecosystem massively.
It opened subsidiaries on numerous different continents, added new products and services, and it constantly continues to work on adding more.
Another excellent selection is Chainlink (LINK), which is a project that offers a decentralized oracle network. Essentially, Chainlink aims to provide a steady flow of information from the real world onto the blockchain, where it can be quickly processed and used in smart contracts, dApps, and alike.
Another major project from the DeFi sector is Aave — a decentralized finance protocol that offers people to give out and take loans. With the process of taking loans from banks being lengthy, complex, and often exclusive, people have long sought out a better way of borrowing money.
Aave emerged as a DeFi project with a solution, allowing people who have some extra money to lend it to others who need it.
Next up, we have yearn.finance (YFI) — a project that offers aggregator services for decentralized finance investors. Essentially, the project uses automatisation to allow yield farming, which is a great way for investors to lock up their tokens and earn money off of them.
Lastly, we have Polkadot (DOT) — an open-source sharding multichain protocol that allows cross-chain transfers of data and assets. Essentially, it is a dream project for anyone seeking interoperability, and as such — DOT has skyrocketed through the ranks to the position of the 4th-largest cryptocurrency.
What Is Cryptocurrency?
Cryptocurrencies are digital currencies — virtual money that has no physical form, nor an underlying asset that would give it value. Many cryptocurrencies run on their own blockchains, although there are also many projects that were created on top of some other project's blockchain.
Cryptos also come with plenty of advantages when compared to traditional money and banking. For example:
- They can perform cross-border transactions instantly
- They are much cheaper
- They are decentralized, so no single entity has total authority over them
- They are easy to store and manage
Of course, cryptos are also still quite new, so they do have some disadvantages worth mentioning, such as:
- They are volatile (their prices can shift suddenly and quite strongly)
- They are mostly not regulated as of yet
Short Term vs Long Term Investing
When it comes to cryptos, there are two types of investing — short-term and long-term.
As the name suggests, short-term investing revolves around buying cryptocurrencies for a brief period, and then selling them again when the price moves in a favourable way. For example, if you buy Bitcoin when its price is $20,000, and that price then grows to $25,000, a short-term trader would likely sell in order to make a profit, before a correction takes place and the price starts dropping again.
Long-term investing, on the other hand, is mostly just buying assets, locking them up, and forgetting about them for years. Long-term investors believe that the prices will go much, much higher in the future than they are now, and they tend to ignore smaller price fluctuations that short-term investors use to make a profit.
How To Find The Best Cryptocurrency to Invest In
Compare Past Price Action
One good way to learn what to expect from a cryptocurrency is to learn what it has already been through in the past. Analyse its history and price action, as it is possible that the coin could reach former heights — or go even higher — again in the future.
Identify Crypto/Fiat Currency Pairs
Once you decide on the coin to invest in, make sure you also check out its fiat and crypto pairs. By learning that, you will also discover if the coin is easy to obtain and what can you exchange for if you decide to use it for further trading.
Sign Up With an Exchange
Naturally, once you identify the exchanges that offer your coin of choice, you need to register on their platforms to be able to trade. Check out which exchanges offer the best prices, the lowest fees and the best security.
Cryptocurrencies are a new form of money, backed by new, emerging technology. They have tremendous potential for the future, as they beat traditional money and financial systems at every turn. These new digital assets are also highly volatile, and when you choose to invest, it is important to do your own research to make this volatility work for you. There are some additional considerations to take into account:
- Is the founder still involved?
- Does the coin have future relevance?
- Are there any developments in the pipeline?
These factors can contribute to the success of a cryptocurrency project, and allow your investment venture to become a successful one.
Frequently Asked Questions
Yes, in most countries around the world, cryptos are entirely legal to own and trade. However, there are some nations, like China and Russia, where they are prohibited from being used as a means of payment.
Anyone. There are no real age restrictions when it comes to owning or using digital coins. However, you do need a bank account and a government-issued ID in order to trade it on centralized exchanges.
Yes, very. As mentioned above, cryptocurrencies are very volatile, which means that their price can go up or down, with no way to know how high or how low.
Yes, there are many online merchants that accept a variety of coins, including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and several others.
The easiest way to obtain cryptocurrencies is to buy them on exchanges. There are other methods, such as crypto mining, although that can be quite expensive and complicated for beginners.
Many believe that they are, although there are also many sceptics who believe that they might only have a minor role in our financial future if they even survive to secure it.
Some banks do offer services for cryptocurrencies, but most do not as of yet. Still, the general stance towards cryptos does seem to be changing in the crypto industry's favour, and so it is likely that most banks will add support for digital coins at some point in the future.
To store cryptos safely, you need a crypto wallet. There are multiple types of wallets, including hot (online) and cold (offline) wallets. Cold storages are the safest, as they don't have access to the internet, so they cannot be hacked.