Best Crypto Investment Strategies: Your Guide To Success

Cryptocurrencies are digital assets that have become an important part of the financial markets. Bitcoin, the oldest and most popular crypto token, started the entire crypto craze and has gained the attention of investors, the media, and businesses. It is considered a good investment option due to its strong liquidity and wide acceptance. Ethereum, the second-largest cryptocurrency, introduced smart contract functionality and provides a platform for decentralised applications and finance. Other cryptocurrencies like Binance Coin, Solana, Tether, and Dogecoin are also gaining popularity and offer unique features such as low transaction fees, stablecoin status, and strong community support. When investing in cryptocurrencies, it is important to consider factors such as market capitalization, liquidity, use cases, and real-world adoption.

Bitcoin's market dominance

Bitcoin, as the first and original cryptocurrency, has consistently maintained its position as the largest digital asset by market capitalization. Its market dominance, however, has fluctuated over time due to various factors. Before the emergence of altcoins, Bitcoin's dominance often exceeded 90%. As altcoins gained traction and investor interest, Bitcoin's dominance decreased as attention and funds were diverted to other cryptocurrencies.

The dynamics of Bitcoin's market share offer insights for investors and traders. Bitcoin dominance is believed to indicate the general market trend and can guide investment strategies. For instance, a high Bitcoin dominance suggests that investors favour Bitcoin over other cryptocurrencies, possibly due to market uncertainty or a preference for a more established and "stable" asset. On the other hand, low Bitcoin dominance could indicate that investors are more willing to take risks and explore other cryptocurrencies with potentially higher rewards.

Traders often refer to Bitcoin dominance to adjust their portfolios and trading strategies. When Bitcoin dominance is high, traders may diversify into other cryptocurrencies, while low dominance may prompt them to invest in Bitcoin. Additionally, Bitcoin dominance can provide clues about potential altcoin seasons, where altcoins outperform Bitcoin, causing a dilution in its dominance.

While Bitcoin dominance is a useful indicator, it does not provide a definitive guide to investment decisions. The cryptocurrency market is complex and influenced by numerous factors. However, Bitcoin's dominance offers valuable insights into market sentiment and can help investors and traders make more informed choices.

Ethereum's smart contracts

Ethereum is a leading platform for decentralised applications (dApps) and smart contracts. Its native token, Ether, is the second-largest cryptocurrency by market capitalisation, accounting for nearly 18% of the total cryptocurrency market.

Smart contracts are a critical part of Ethereum's development and can be understood as digital vending machines. They are self-executing pieces of code that follow an "if this, then that" structure, and are programmed to execute when certain preset conditions are met. For example, a smart contract could be written to hold funds in escrow for a child, only releasing them after a specific date.

Smart contracts are stored on the blockchain, which gives them two key properties: immutability and global distributability. Immutability means that once a smart contract is deployed, it cannot be tampered with. Global distributability means that everyone on the blockchain network validates the contract's output, making it almost impossible to alter.

Smart contracts are written in developer-friendly languages such as Solidity and Vyper, and deployed to the network. They are a type of Ethereum account, which means they have a balance and can be the target of transactions. However, they are not controlled by a user; instead, they are deployed to the network and run as programmed.

Smart contracts are useful for audits and tracking, as anyone can instantly track asset transfers and other related information on the public blockchain. They also protect your privacy, as Ethereum is a pseudonymous network that ties your transactions to a unique cryptographic address, not your identity.

Ethereum's switch to a proof-of-stake system has also improved its energy efficiency, giving it an advantage over Bitcoin.

Stablecoins

Some of the most popular stablecoins include:

• Tether (USDT): One of the earliest stablecoins, Tether has been plagued by controversies over the years, but it has maintained a stable 1:1 peg with the US dollar.
• USD Coin (USDC): Backed 1:1 with USD, this stablecoin was developed by the Centre Consortium, founded by Circle, a peer-to-peer payments company based in Boston, Massachusetts.
• Dai (DAI): An Ethereum-based stablecoin that is not pegged to US dollars or gold but instead uses a system of Ethereum smart contracts to keep its value pegged at 1:1 to the US dollar.
• First Digital USD (FDUSD): Introduced in June 2023, this stablecoin is backed by the US dollar (or assets of equivalent value) and has rapidly grown its adoption thanks to its use on Binance.
• Pax Dollar (USDP): A fully regulated stablecoin launched by Paxos Trust Company, a fintech company based in New York. It is asset-backed, with reserves of US dollars held in a 1:1 ratio.
• True USD (TUSD): A dollar-backed stablecoin launched in 2018 on TrustToken, a platform designed to create various asset-backed tokens.

While stablecoins may be less volatile than other forms of crypto, they are still a new technology with unknown bugs and vulnerabilities. They have also been facing a high level of regulatory uncertainty, and it is important to carefully research the team and mechanism behind each stablecoin before investing.

Binance Coin's utility

Binance Coin (BNB) is the cryptocurrency issued by the Binance exchange, which was the second-largest cryptocurrency exchange in the world as of May 2024. BNB has a market cap of over $42 billion, ranking it as the third-largest cryptocurrency by market cap behind Ethereum and Bitcoin.

BNB was created in 2017 as a utility token for discounted trading fees on the Binance exchange. Since then, its use cases have expanded to include:

• Paying for transaction fees on Binance.com, Binance DEX, and Binance Chain
• Payments for goods and services at various vendors, including Monetha and HTC
• Travel bookings at sites such as TravelbyBit, Trip.io, and Travala.com
• Entertainment purposes, such as buying music and game rewards
• Online services, including BitTorrent and Canva
• Financial services, including loans at ETHLend and investments at Moeda

BNB can also be used as gas on the BNB Chain and for investing in certain ICOs listed through Binance's Launchpad program. The Binance Smart Chain, which uses BNB as its native token, has also gained popularity with developers and users, further expanding the utility of BNB.

Binance regularly performs coin burns to reduce the supply of BNB and potentially increase its value. As of May 2024, Binance had burned a total of 29,467,175 BNB, equivalent to $670.78 million.

Solana's speed

Solana is widely regarded as the fastest blockchain, with a high volume of transactions per second (TPS) and low fees. Its TPS is significantly higher than that of Ethereum and Polygon, which are also large blockchain networks.

Speed and TPS

Solana's theoretical maximum TPS is 65,000, meaning that the network was operating at just 1.6% of its potential speed. This indicates that Solana has a lot of room to grow and handle even more transactions per second.

Low Fees

In addition to its impressive speed, Solana also boasts low fees for both developers and users. Fees remain below $0.0025 per transaction, making it an attractive option for those looking to conduct a high volume of transactions without incurring high costs.

Other Benefits of Solana

Solana is designed to support a wide range of users, from power users to new consumers. It has gained a reputation as a serious contender to Ethereum for decentralised applications (dApps), decentralised finance (DeFi), and non-fungible tokens (NFTs).

The Solana blockchain is also more environmentally friendly than some other networks. Each Solana transaction uses about the same energy as a few Google searches, minimising its impact on the environment.

Challenges

Despite its impressive speed and low fees, Solana has faced some challenges and network reliability issues. In February 2024, the network experienced a significant outage due to performance degradation, and its DeFi protocol Pump.fun was attacked, resulting in a loss of $2 million.

Overall

While Solana has faced some challenges, its speed, low fees, and focus on scalability make it an attractive option for new investors and those looking to conduct a high volume of transactions. Its potential for growth and ability to handle thousands of transactions per second are also notable advantages.

Frequently asked questions