Best Cryptocurrency Investment Options: Where To Invest?

Cryptocurrencies are digital assets that are usually created using blockchain technology, a cryptographic computer networking technology. They are traded on public exchanges but are generally not subject to the same regulations as stocks and other traditional investment products.

Bitcoin is the original cryptocurrency and the largest by market capitalization. It is followed by Ether, the native token on the widely-used Ethereum blockchain. Both have mainstream acceptance and are considered the best in their asset class.

Other cryptocurrencies worth mentioning include Tether, a stablecoin whose value is supposed to be more consistent than other cryptocurrencies; Binance Coin, which can be used to trade and pay fees on Binance, one of the largest crypto exchanges in the world; Solana, a blockchain that has become known for facilitating the easy creation of decentralized applications; and Dogecoin, which started as a joke in 2013 but has become a prominent cryptocurrency thanks to a dedicated community and creative memes.

When choosing which cryptocurrency to invest in, it is important to consider your individual goals, investing timeline, and risk profile.

Bitcoin and its history

Bitcoin (BTC) is the first and most well-known cryptocurrency. It was created in 2009 by a pseudonymous computer programmer or group of programmers known as Satoshi Nakamoto. Bitcoin is a decentralized cryptocurrency, meaning it operates without a central authority or server and is instead maintained by a peer-to-peer network.

Bitcoin was initially designed as a medium of exchange but is now primarily regarded as a store of value and investment. Its creation was first proposed in a white paper published in 2008 by Nakamoto, titled "Bitcoin: A Peer-to-Peer Electronic Cash System." The paper detailed methods for using a peer-to-peer network to generate "a system for electronic transactions without relying on trust."

On January 3, 2009, the bitcoin network was created when Nakamoto mined the genesis block of the blockchain. The first bitcoin transaction occurred on January 12, 2009, when Nakamoto sent 10 bitcoins to programmer Hal Finney.

In its early days, bitcoin was associated with black markets such as the dark web marketplace Silk Road, which exclusively accepted bitcoins as payment. However, it gradually gained recognition as a legitimate investment, with Forbes naming it the best investment of 2013.

Bitcoin has experienced significant price volatility, with its value soaring and crashing multiple times since its creation. It has also faced scrutiny for its heavy electricity consumption and potential impact on climate change.

The identity of Satoshi Nakamoto remains a mystery, and there has been much speculation about who this person or group might be. Some suspects include Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bit gold.

Bitcoin has had a profound impact on the financial world, sparking the creation of numerous other cryptocurrencies and shaping the future of money and transactions.

Ethereum and its advantages

Ethereum is a lot more than just a cryptocurrency. It is the second-largest blockchain project in the world, designed to be a versatile platform that supports a digital currency, smart contracts, and decentralised applications (DApps). Here are some of the advantages of investing in Ethereum:

Smart Contracts

Ethereum was the first blockchain to introduce smart contracts, which are self-executing, tamper-proof agreements with predefined rules that automatically execute when certain conditions are met. This innovation has opened doors to various industries, including finance, supply chain, gaming, and healthcare, by reducing the need for human oversight and increasing efficiency.

Decentralisation

Ethereum operates on a global, decentralised blockchain secured by a network of nodes, which validate transactions and ensure that no central authority controls the platform. This enhances security and empowers individuals, giving them control over their digital assets and data.

Transparency and Security

All transactions and smart contracts executed on Ethereum are recorded on a public ledger, providing transparency and reducing the chance of fraud and corruption. Ethereum's security features, such as cryptographic encryption and decentralised consensus mechanisms, make it highly resistant to attacks.

Flexibility and Customisation

Ethereum's flexibility allows developers to create various decentralised applications and tokens to suit different use cases. Its programming language, Solidity, supports Turing-complete smart contracts, enabling the creation of complex and customisable applications. This has led to the emergence of innovative projects, including Decentralised Finance (DeFi) platforms and Non-Fungible Token (NFT) marketplaces.

Growing Ecosystem

Ethereum has a thriving and rapidly expanding ecosystem, with many projects, protocols, and initiatives built on its open-source platform. Ethereum-based tokens and DApps have gained widespread adoption, attracting users and investors. This network effect reinforces Ethereum's position as a leader in the blockchain space.

Interoperability and Standards

Ethereum's adoption of common standards, such as ERC-20 for fungible tokens and ERC-721 for non-fungible tokens, has contributed significantly to the interoperability of blockchain assets. These widely accepted standards have facilitated the creation and exchange of tokens across different DApps and platforms, streamlining the development and integration of blockchain-based solutions.

Community and Developer Support

Ethereum has a large and active community of developers, enthusiasts, and stakeholders committed to its growth and improvement. This strong community support results in continuous development, research, and upgrades to address issues and enhance the platform's capabilities.

Ethereum 2.0 Transition

Ethereum is actively addressing its scalability and energy consumption issues with the multi-phase Ethereum 2.0 upgrade. This involves transitioning to a more energy-efficient Proof-of-Stake (PoS) consensus mechanism and implementing shard chains to improve scalability. Once fully implemented, Ethereum 2.0 is expected to significantly enhance the platform's performance and sustainability.

Meme coins and their popularity

Meme coins are a type of cryptocurrency that takes inspiration from internet memes. They are built around memes and can be dog-themed, food-themed, celebrity-themed, or politician-themed. Dogecoin (DOGE), which was created in 2013, is widely regarded as the first meme cryptocurrency. Its name comes from a popular meme at the time featuring a Shiba Inu dog named Kabosu.

Meme coins are cheaper than large-cap cryptocurrencies like Bitcoin and are more accessible to a wider audience. They are also more lighthearted and focus on fun, humour, and community engagement rather than blockchain technology and scaling solutions. Group marketing creates hype, driving buy pressure for the meme coin project.

Meme coins are highly volatile and prone to drastic swings in price. Their value is determined by the momentum they can generate and whether they can maintain their audience's interest. Some meme coins have turned a considerable profit for their holders, with Shiba Inu, for example, shooting up by more than 40,000,000% at one point. However, the vast majority will likely be defunct in a few years or months.

Meme coins are mostly available on decentralised exchanges (DEXs) like PancakeSwap, as they often do not meet the safety and value standards of centralised exchanges.

Some popular meme coins include Baby Doge Coin, SHIBA INU, Shiba BSC, Mini Baby Doge, DiarrheaCoin, and CUMROCKET.

Crypto wallets and their importance

A crypto wallet is a device, application, or program that functions as a wallet for your cryptocurrency. It is called a wallet because it is used similarly to a physical wallet where you put cash and cards in. Instead of holding physical items, it stores the passkeys you use to sign for your cryptocurrency transactions and provides the interface that lets you access your crypto.

There are several different types of wallets, each with its own features and levels of security. The two main types of wallets are custodial (or online wallets) and non-custodial wallets. Custodial wallets are hosted by a third party, such as a company that provides enterprise-level data security systems, that stores your keys for you. Non-custodial wallets are the type that most cryptocurrency wallets on devices are, where you take responsibility for securing your keys.

There are also two subcategories of wallets: hot and cold. A hot wallet has a connection to the internet or to a device that has a connection, while a cold wallet has no connection. Lastly, there are three subcategories of wallets: software, hardware, and paper. Each of these types is considered either a hot or cold wallet.

• Software wallets: These are applications for desktops and mobile devices. They can access your cryptocurrency, make transactions, display your balance, and more. Examples include Trezor, Electrum, and Mycelium. Software wallets are generally hot wallets.
• Hardware wallets: These are devices that resemble USB drives and are the most popular type of wallet. They can store your private keys and remove them from your device. Most hardware wallets can sign cryptocurrency transactions automatically without requiring you to enter the key. Examples include Ledger and Trezor. Hardware wallets are generally considered cold wallets.
• Paper wallets: Early crypto users would write or type their keys on paper. These wallets have evolved to include the keys and QR codes so that wallets on mobile devices can scan them. However, paper wallets are easily damaged or lost, so many crypto owners do not use them anymore.

The importance of crypto wallets lies in their ability to securely store and manage your cryptocurrency keys and provide access to the blockchain or crypto-related services. Wallet safety is crucial as cryptocurrencies are high-value targets for hackers. Some security measures include encrypting the wallet with a strong password, using two-factor authentication for exchanges, and storing any large amounts offline.

Crypto exchanges and how to choose one

Crypto exchanges are online platforms that make it convenient for users to purchase and sell cryptocurrency. They work similarly to a broker, giving you the tools to trade, buy, and sell cryptocurrencies like Bitcoin, Ethereum, and Tether.

• Reputation and Security: Look for a reputable exchange with a history of strong security protocols and measures in place. Check for transparency, an available physical address, and a good track record regarding security issues.
• Fees: Crypto exchanges typically charge transaction fees, which can be based on the transaction size or trading activity. Compare the fee structures of different exchanges and consider how they would impact your trading strategies and investment returns.
• Supported Currencies and Pairs: Different exchanges offer varying numbers of supported cryptocurrencies and trading pairs. Choose an exchange that provides access to the currencies and pairs you are interested in trading.
• User Experience and Features: Consider the user-friendliness of the platform, especially if you are a beginner. Also, look for features like advanced trading options, staking, lending, and digital asset custody.
• Customer Service: Research the exchange's customer support options and feedback from other users. Ensure they provide adequate assistance if you encounter issues or have questions.
• Regulatory Compliance: Check if the exchange complies with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations and other financial regulations. This ensures the exchange operates legally and securely.
• Withdrawal Options: Review the withdrawal options and associated fees. If you plan to move your crypto holdings to a separate wallet, choose an exchange that allows fee-free withdrawals or has favourable conditions.
• Account Creation Process: The best exchanges should have a robust account creation process that verifies your identity and ensures the security of your personal information.
• Storage Options: Some exchanges offer custodial accounts where they hold your private keys and effectively store your funds. Others provide non-custodial wallets, giving you complete control over your private keys and crypto assets.
• Reviews and Feedback: Before selecting an exchange, thoroughly research user reviews and feedback. Look for potential red flags, security breaches, or other issues that may impact your decision.

Frequently asked questions