Small Investments, Big Returns: Choosing The Right Cryptocurrency

Cryptocurrencies are digital currencies that are usually based on blockchain technology. Bitcoin is the original cryptocurrency and remains the most popular, but there are thousands of other options. These are known as 'altcoins' and include Ethereum, Tether, Binance Coin, and Dogecoin, among others.

When considering which cryptocurrency is best for a small investment, it's important to remember that the crypto market is extremely volatile and unpredictable. One minute an asset may seem like a good investment, and the next, it may completely collapse.

Some of the most important factors to consider when choosing a cryptocurrency for a small investment include high liquidity, the popularity of the project, sensitivity to crypto news and trends, and the use cases of the coin. It's also crucial to remember that short-term trading is a high-risk investment and that the crypto market is fraught with sophisticated players, making it a challenging experience for novices.

Some cryptocurrencies that are often considered good options for small investments or short-term trading include Bitcoin, Ethereum, Binance Coin, XRP, Dogecoin, and Shiba Inu, among others. These coins have high liquidity, volatility, and responsiveness to news and trends, making them suitable for short-term gains. However, it's important to note that the crypto market is constantly changing, and an asset that is suitable for short-term trading one day may not be the next.

Before investing in cryptocurrencies, it's essential to do your own research, consult with a financial advisor, and only invest what you can afford to lose.

Bitcoin: the original cryptocurrency with high liquidity

Bitcoin (BTC) is the original cryptocurrency, created in 2009 by Satoshi Nakamoto. It runs on a blockchain, a decentralised ledger of transactions distributed across a network of thousands of computers. Bitcoin is kept secure through a process called 'proof of work', which requires cryptographic puzzles to be solved in order to verify transactions.

High Liquidity

One of the key advantages of Bitcoin for investors is its high liquidity. As the most widely recognised and adopted cryptocurrency, Bitcoin offers the advantage of high liquidity. This means that investors can easily buy and sell Bitcoin, as there is always demand in the market. High liquidity also contributes to Bitcoin's volatility, which can bring significant profits or losses.

Volatility

Bitcoin is highly volatile, and its price can change by thousands of dollars in just a few hours. This volatility is driven by various factors, including news in the crypto and financial world, as well as influential individuals like Elon Musk. For example, the Bitcoin price surged by nearly 20% after the collapse of the Silicon Valley Bank in March 2023. This volatility makes Bitcoin suitable for day trading or swing trading for those looking to profit from short-term price movements.

Long-Term Investment Potential

While Bitcoin is a popular choice for short-term investments, it is also considered a good long-term investment by many. This is due to its limited supply of 21 million coins, which is expected to increase its value over time.

Where to Buy Bitcoin

It is recommended to buy Bitcoin on reputable and secure cryptocurrency exchanges such as Binance, KuCoin, or Kraken. These exchanges offer strong security measures and convenient features that make the trading experience safe and user-friendly.

Risks and Considerations

It is important to remember that investing in Bitcoin carries risks. The highly volatile nature of Bitcoin means that there is a potential for significant gains but also substantial losses. Additionally, the crypto market is extremely unpredictable, and an asset's performance can change rapidly. Therefore, investors should always conduct their own research, carefully examine the market, and only invest what they can afford to lose.

Ethereum: popular for creating decentralised applications

Ethereum is a popular choice for creating decentralised applications, also known as 'dapps'. Dapps are a growing movement of applications that use blockchain technology to disrupt traditional business models or invent new ones.

Ethereum's dapps are built on its decentralised blockchain and use its native digital currency, Ether. The Ethereum Foundation, the trade organisation overseeing Ethereum's development, regularly runs 'hackathon' events to promote new decentralised applications.

Dapps are typically open-source and operate autonomously through the use of smart contracts, which are like sets of rules that live on-chain for all to see and run exactly according to those rules.

• Vevue: A project that aims to "bring Google Street View to life" by enabling users to take 30-second video clips of places and share them with others around the world. Users can earn bitcoin or Vevue equity tokens in selected areas.
• Etheria: A Minecraft-like virtual world in which players can own and 'farm' tiles to build things. All aspects of Etheria are "agreed to" by the participants of the Ethereum network, without any central authority. This means Etheria cannot be censored or taken down by any one individual or entity.
• KYC-Chain: A service that aims to provide consensus on the identity of individuals at the "highest level of trust". It utilises existing know-your-customer (KYC) regulations and plans to bring "ease and simplicity" to the process of identification for businesses. The platform's "identity wallets" allow users to share only the necessary information.
• 4G Capital: A concept dapp for the use of smart contracts to fund small businesses in Kenya using digital currency.
• Eth-Tweet: A decentralised microblogging service with basic Twitter-like functionality. Being decentralised means no central entity controls what is published, and messages can only be removed by the publisher. Accounts can also receive donations in Ether.
• WeiFund: A crowdfunding solution on the Ethereum ecosystem. It aims to provide "world-class open-source modular and extensible" crowdfunding utilities that everyone can access.

Ethereum dapps have also been utilised in decentralised finance (DeFi), where they perform financial functions on blockchains. Examples include lending, borrowing, earning interest, and making private payments.

However, it's important to note that dapps are still a new field, and they often struggle to attract and retain users. Additionally, the user experience can be poor, as they are often developed with a priority on functionality, maintenance, and stability rather than user interface.

Tether: a stablecoin with a value of $1

Tether (USDT) is a stablecoin, a type of cryptocurrency that aims to peg its market value to a currency or other external reference point to reduce volatility. Tether's price is tied directly to the US dollar, with the developers claiming to hold one US dollar for every circulating USDT. This system allows users to easily make transfers from other cryptocurrencies back to US dollars without having to actually convert to standard currency.

Tether was one of the first stablecoins and remains one of the most popular. It describes itself as "a blockchain-enabled platform...to make it easier to use fiat currency digitally". In other words, it allows individuals to use blockchain technology and related tools to transact with traditional currencies while minimising the volatility and complexity often associated with digital currencies.

Tether's price is stable at $1.00 per token, and on July 22, 2023, it was the third-largest cryptocurrency by market capitalisation, with a market cap of $83.8 billion.

Binance Coin: used for payments and purchasing goods

Binance Coin (BNB) is a utility cryptocurrency with a wide range of applications, including payments for transaction fees, travel bookings, entertainment, online services, and financial services. It is the native token of the Binance exchange, one of the largest and most popular crypto exchanges in the world. BNB can be used to pay for transaction fees on Binance.com, Binance DEX, and the Binance Chain. It can also be used for payments at select merchants and to book travel accommodations at various websites. Additionally, BNB can be used for entertainment purposes, such as buying music and game rewards, and for online services such as BitTorrent and Canva.

One of the unique features of Binance Coin is the quarterly burning event, where Binance uses one-fifth of its profits to repurchase and permanently destroy (burn) BNB from its treasury, creating scarcity and potentially impacting its value over time. As of May 2024, Binance Coin had a market cap of over $87 billion, ranking behind only Bitcoin, Ethereum, and USD Tether.

In terms of investing, Binance Coin has shown impressive growth. Since its launch in 2017 at a price of $0.10, BNB has experienced significant price appreciation. By late September 2024, its price had risen to around $520, representing a gain of over 500,000%. However, it's important to remember that the cryptocurrency market is highly volatile, and past performance doesn't guarantee future results.

When considering investing in Binance Coin or any other cryptocurrency, it's essential to assess your risk tolerance, investment goals, and conduct thorough research. Cryptocurrencies are highly speculative investments, and it's possible to lose money, so always invest with caution and consult a financial advisor if needed.

Solana: a newer cryptocurrency with a robust platform

Solana (SOL) is a newer cryptocurrency that has been making waves in the crypto world since its launch in March 2020. It is a blockchain platform designed to support decentralized applications (dApps) and improve blockchain scalability. With its innovative technology, Solana has positioned itself as a strong competitor to Ethereum, the second-largest cryptocurrency.

One of Solana's key strengths is its ability to process transactions quickly and securely. It utilizes a unique hybrid protocol system that combines Proof-of-Stake (PoS) and Proof-of-History (PoH) mechanisms. This allows for the creation of secure timestamps for each transaction, enabling nodes to process transactions without communicating with each other, resulting in significantly faster processing times. This makes Solana ideal for decentralized finance (DeFi) solutions and non-fungible tokens (NFTs).

The Solana blockchain is also highly scalable, claiming to support up to 50,000 transactions per second while maintaining low transaction fees. This scalability and speed have attracted a diverse range of users, from small-scale individuals to institutional entities. Additionally, Solana's proof-of-stake network minimizes its environmental impact, with each transaction using a similar amount of energy as a few Google searches.

Solana has gained the attention of major companies, with Visa, Meta, Stripe, and Shopify all having projects on its platform. It has also formed partnerships with companies like PayPal and Stripe, further enhancing its payment processing capabilities.

While Solana has experienced occasional network outages and performance issues, it continues to iterate and improve its platform. Its focus on high-speed, low-cost operations, and robust platform for trading digital assets makes it an attractive option for those seeking efficient blockchain solutions.

Frequently asked questions