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Investing in cryptocurrencies is another way to diversify your portfolio. However, it can be hard to know what’s the best cryptocurrency to invest in.
Thankfully, we’re here to help. In this article, we’ll introduce you to the best cryptocurrencies to invest in based on market capitalization, technology, liquidity, and track record.
We’ll discuss what makes each crypto unique as well as the advantages and risks of each coin/token. We’ve even put together a guide to what to look for when evaluating cryptocurrencies so you can make the right decision for your investment style.
Best Cryptocurrency to Invest In
There are thousands of cryptocurrencies, but not all are worthy investments. If you’re looking for the best cryptocurrency to invest in, here are some options to consider. Also, make sure you check out our how to invest in cryptocurrencies guide to learn more about crypto.
1. Bitcoin (BTC)
Considered to be the original cryptocurrency, Bitcoin hit the market in 2009 after being described in a 2008 whitepaper, which was written under the alias Satoshi Nakamoto.
What made – and continues to make – Bitcoin so special is that it’s a decentralized digital currency that operates on a blockchain. It’s a fully peer-to-peer system, so there’s no need for a central authority to manage payments between people or institutions.
The primary benefit to Bitcoin is that it was the first cryptocurrency. Bitcoin dominates the market and it’s highly liquid. The downside is that Bitcoin’s Proof-of-Work (PoW) consensus algorithm is slow and pricey. However, the “Lightning Network” is a second layer added to Bitcoin’s network to speed up transaction processing times and decrease costs.
- First true cryptocurrency
- Fully decentralized
- Limited total supply
- Highly liquid
- Very volatile
- Slow and expensive transaction validation
2. Ethereum (ETH)
Ethereum is a decentralized open-source blockchain system that was launched in 2015. Technically, Ethereum is the name of a cryptocurrency network and Ether (ETH) is its native token, but the terms are used interchangeably.
What makes Ethereum valuable is that it was the first crypto to effectively use smart contracts. Smart contracts allow transactions and agreements to be executed between two parties without the need for a third-party authority. Ether also uses PoW, but it will transition to Proof-of-Stake (PoS) with the Ethereum 2.0 update.
However, Ethereum is not supply-fixed, so the amount of Ethereum in circulation can increase, which could hurt its value. The cost of Ethereum transactions has also been on the rise as the token gains popularity. Ethereum is available on Coinbase, Gemini, and Kraken.
- Uses smart contracts
- Fast transactions
- Native token for the Ethereum network
- Completely decentralized
- Increasing transaction costs
- Total supply is not fixed
3. Tether (USDT)
USDT is a stablecoin that mirrors the US dollar. USDT is issued by a Hong Kong-based company, Tether, that launched the crypto in 2014 on the Bitcoin blockchain; however, it now works on other networks, including Ethereum, EOS, and Tron.
The price of USDT should be similar to that of the US dollar. This is because the company that backs the token matches the amount of USD they have in reserve to the total USDT in circulation. This stable price helps reduce the token’s volatility, making it useful for financial transactions.
However, USDT isn’t supply-limited and it isn’t decentralized. Plus, while USDT is supposed to be backed by the USD dollar, investors have to trust that the company is truly keeping enough cash in reserve. Tether is available on Coinbase, Crypto.com and Kraken.
- Backed by the US dollar
- Stable price
- Convenient for transactions
- No guarantee of USD reserves
- Not decentralized
4. Binance Coin (BNB)
Binance Coin is the native token of Binance, one of the world’s largest crypto exchanges. The coin was launched in 2017 as a utility token that powers Binance’s ever-growing system of decentralized networks.
Binance Coin has seen large price increases in recent months. It has a maximum supply of about 170.5 million coins and it operates on a speedy PoS consensus model. Plus, people who trade on Binance’s exchange can get discounts on fees by paying with Binance Coin.
However, Binance Coin is not widely available. While you can purchase it on Binance, there are few other places to buy it. Additionally, it’s unclear what benefit the coin might have outside of the Binance ecosystem. Binance Coin is available on Binance and Crypto.com.
- Increasing price trend
- Limited total supply
- Fast transactions
- Can be used for Binance trading fees
- Limited trading availability
- Purpose outside of Binance is unclear
5. Cardano (ADA)
Launched in 2017, Cardano is a proof-of-stake blockchain that uses ADA as its native token. Cardano’s founders state that the project is supposed to redistribute wealth by revolutionizing the financial system.
The total ADA supply is limited to 45 billion, and it’s secured through a so-called environmentally sustainable PoS protocol. It’s substantially more energy-efficient than Bitcoin and it processes transactions much more quickly. Plus, all Cardano network upgrades are subjected to coin-holder consensus before being implemented.
However, Cardano doesn’t yet support smart contracts. It’s expected to do so soon, but without smart contracts, its utility is limited. Cardano is also fairly new, so it hasn’t yet been tested in its resilience to widespread volatility. Cardano is available on Coinbase, Crypto.com, and Kraken.
- Environmentally sustainable network
- Speedy PoS protocol
- Also acts as a governance token
- Limited total supply
- Doesn’t currently support smart contracts
- New coin with limited history
6. XRP (XRP)
Sometimes called Ripple, XRP is the native token for RippleNet, a digital payment network managed by the company named Ripple. Interestingly, XRP is a cryptocurrency that doesn’t operate on the blockchain. Rather, it operates on the open-source XRP ledger.
The advantage of XRP is that it can be used as a very fast, cost-efficient, and scalable way to send money. This makes it a potential replacement for slow traditional transaction methods, like wire transfers. It also runs on independent validator nodes to validate payments, rather than PoS or PoW, which speeds up transactions.
However, XRP is currently embroiled in a complicated SEC lawsuit, which could affect its value and has made it difficult to buy in the US. Plus, while RippleNet could be revolutionary, it doesn’t technically need XRP to function or process payments.
The maximum supply of XRP is capped at 100 billion. XRP is available on Kraken.
- Incredibly fast processing time
- Very low expenses
- Concept is potentially revolutionary
- Easily scalable
- Current legal troubles
- XRP isn’t necessary for RippleNet functionality
7. Polkadot (DOT)
DOT is a new type of cryptocurrency that’s designed to facilitate the transfer of a wide range of data and assets. It’s the native token for the Polkadot protocol and there’s no maximum supply of coins.
The coin’s benefit is that it can be used to quickly and securely process transactions on multiple blockchains at the same time. So, it can be scaled to support an ever-growing network in the future. DOT can also be used to connect different blockchains or create other decentralized applications.
A downside to DOT is that it’s very new, so it’s hard to assess its future value. Additionally, DOT occupies a similar niche to many other smart contracts platforms, which makes it difficult to know if it will succeed in the long term. Polkadot is available on Coinbase, Crypto.com, and Kraken.
- Can connect multiple blockchains
- Easily scalable
- High security
- Fast processing speeds
- Short market history
- High market competition
8. Uniswap (UNI)
UNI is the native token of Uniswap, a leading decentralized trading protocol. Unlike centralized trading platforms, such as Kraken and eToro, Uniswap operates without a central authority. It also operates with a unique automated liquidity protocol that helps process orders as quickly as possible.
Uniswap’s native coin, UNI, is a governance token. So, UNI owners have a say in how the Uniswap network operates. The more UNI you hold, the more power you have. While UNI isn’t a store of value, per se, the idea is that the tokens will become more valuable over time.
While many do believe that Uniswap will succeed, there’s no guarantee of this happening. If Uniswap becomes less popular, the UNI token may lose value. Plus, there’s no hard cap on the number of UNI tokens. After the first batch of 1 billion UNI tokens is released, there will be an inflation rate of 2% each year that could affect the token’s value. Bitcoin is available on Coinbase, Gemini, and Kraken.
- Native token to an innovative DeFi protocol
- Serves as a governance token
- Potential to increase in value over time
- Young token with an unproven track record
- No hard cap on total supply
9. Stellar (XLM)
XLM, or the lumen, is the native token for the Stellar network. Stellar is an innovative money storage and transfer system. It was released in 2014 in the hopes of making transfers easier for people who don’t have access to traditional banking services.
The lumen is an inexpensive and efficient way to transfer money around the world. It is very similar to XRP because its transactions are also very cheap and efficient. Plus, Stellar is actively trying to connect its network to large financial institutions to facilitate international funds transfers.
But the lumen has a smaller market cap and a shorter track record than XRP. The lumen also isn’t designed to be for-profit, so it may not be a major store of value. But if Stellar succeeds in its project, the lumen’s value could increase as more people use the network.
- Designed to facilitate low-cost funds transfer
- Very low transaction costs
- Expanding business model
- Provides potential economic and social benefits
- Short track record
- Similar to XRP
- Not designed as a for-profit network
10. Litecoin (LTC)
Litecoin was launched in 2011 as a direct response to certain Bitcoin shortcomings. Litecoin is based on Bitcoin, but it’s designed to process transactions much more quickly and cheaply than its predecessor.
The benefits of Litecoin include much faster block times, very low transaction fees, and a maximum supply of 84 million coins. Litecoin is currently one of the most widely accepted coins for daily transactions because it’s more functional for use as an actual currency.
However, Litecoin is in a constant battle with Ethereum as the front-runner for the best Bitcoin replacement. The coin has also been losing market share consistently over the years, so there’s some speculation about its future. Litecoin is available on Coinbase, Gemini, and Kraken.
- Very fast block times
- Nearly negligible fees
- Widely accepted coin
- Long track record
- Shrinking market share
- Lacking brand recognition
11. Bitcoin Cash (BCH)
Bitcoin Cash is the result of a hard fork in the Bitcoin protocol. It came into existence in 2017 after a Bitcoin scalability dispute. With Bitcoin Cash, the idea is that the coin can power a highly scalable peer-to-peer money transfer system.
The advantage of Bitcoin Cash is that it has a larger block size. Therefore, it can handle more transactions at a lower cost. At the same time, there’s a limited supply of 21 million coins. Therefore, if Bitcoin Cash becomes a popular money transfer system, there’s a hope that the coin’s price will increase.
Bitcoin Cash’s drawbacks mostly have to do with its branding. The coin hasn’t been as popular as Bitcoin and many people don’t know the difference between the two. It’s also less liquid than Bitcoin and mining it is less profitable. Bitcoin Cash is available on Coinbase, Gemini, and Kraken.
- Larger block size than bitcoin
- Fast, low-cost transactions
- Easily scalable
- Limited total supply
- Lower mining profit margins
- Branding and popularity issues
LINK is the native token for Chainlink. Chainlink is a decentralized Oracle network that uses smart contracts to send funds or information. It’s designed to be fast, verifiable, and highly secure.
LINK is how people who use the network pay for the network’s services. LINK has a total supply of 1 billion tokens and the network is already showing signs of great potential growth. Therefore, as the network sees more use, LINK could increase in value.
Nevertheless, LINK’s value is dependent on the success of Chainlink. While many are bullish on Chainlink’s potential, only time will tell if this new network succeeds in its goals. Chainlink is available on Coinbase, Gemini, and Kraken.
- Utility token for a ground-breaking network
- Very fast and secure transactions
- Growing importance of the Chainlink network
- Limited total supply
- Limited track record
- LINK value depends on Chainlink’s success
What to Look for in a Cryptocurrency
There are plenty of great cryptocurrencies to invest in. But with so many options, how do you know which one is worth your hard-earned money? Here are four important things to look for in a cryptocurrency:
When you buy cryptocurrency, you’re investing in technology because much of a coin’s value comes from the quality of its underlying technology. Some important technology features to consider when evaluating coins include:
- Smart Contracts: Smart contracts make transactions and agreements possible without the need for a third-party authority.
- Scalability: Crypto scalability is a coin’s ability to handle network growth. Networks with small block sizes, like Bitcoin, are less scalable, which can cause usability issues.
- Cost Transfer Efficiency: Some coins can be sent more cheaply than others. This can lead to major cost savings in the long term.
- Total Supply: Many coins have a maximum total supply while others don’t. Fixed-supply coins may have long-term price growth while inflationary coins act more like a central bank.
- Decentralization: Not all cryptocurrencies are decentralized. For example, the supply and value of USDT and XRP are in many ways determined by their parent organizations, which makes them centralized and prone to unforeseen changes.
- Security & Privacy: Some cryptocurrencies allow people to process transactions anomalously. Others, like Bitcoin, publish all public addresses on the public ledger in the spirit of full transparency.
New cryptocurrencies hit the market all the time, but that doesn’t necessarily make them a good investment. Untested cryptocurrencies are very risky.
As a result, the longevity of a coin is often an important investment consideration. Tokens that have been around for a while, like Bitcoin and Ethereum, are often more trustworthy. This is partially because older, more established coins are less likely to be complete scams, but also because you have more access to information about that coin and its functionality.
You should always look at how well a given cryptocurrency has performed in the past, both compared to other coins and fiat money. Coins that show signs of steady growth can be attractive investment opportunities.
Of course, keep in mind that past performance is no indicator of future success. A coin’s track record is only valuable in conjunction with a solid understanding of how it works and its opportunities for future growth.
Liquidity is a critical concern in any asset class because more liquid assets are easier to trade. This is particularly important in cryptocurrencies where low liquidity can add volatility into an already volatile system.
Additionally, high liquidity is an indicator that many people are interested in a given cryptocurrency. More liquid coins are easier to buy and sell at an advantageous price on centralized exchanges.
FAQs About the Best Cryptocurrency to Invest In
Here are our answers to some of your most common questions about the best cryptocurrency to invest in.
How Do You Buy a Cryptocurrency?
You can buy cryptocurrency in one of two ways: through an exchange or a brokerage. Purchasing through a crypto exchange – like Coinbase, Kraken, or Gemini – allows you to buy crypto and then transfer it to any other wallet. Buying crypto through a broker like Robinhood and SoFi Invest is straightforward but you often can’t transfer your coins externally.
What Is the Difference Between Proof-of-Work (POW) and Proof-of-Stake (POS)?
Proof-of-Work (POW) and Proof-of-Stake (POS) refer to how mining happens on certain blockchains. POW requires that miners solve a mathematical puzzle to confirm transactions. In exchange, they get rewarded with coins. POS awards blocks and coins to miners that have proportionally more coins than other miners. Effectively, the more coins you “stake,” the more likely you are to earn future coins.
What Is an Altcoin?
An altcoin is any cryptocurrency other than Bitcoin. Since Bitcoin is considered to be the original cryptocurrency, any newer coin is usually designed to address some sort of drawback to Bitcoin and is called an altcoin.
What Is a Stablecoin?
A stablecoin is any cryptocurrency whose value is pegged to a certain asset. For example, a coin may be pegged to the US dollar or gold. Theoretically, pegging helps stabilize a coin’s market price.
What Are Smart Contracts?
Smart contracts are self-executing contracts that function on certain blockchains. They have agreement terms written into their code. So when a buyer and seller meet these terms, the contract processes a transaction on the blockchain. Smart contracts were popularized by Ethereum, but can now be found on other blockchain networks.
With more than 4,000 cryptocurrencies on the market today, you have no shortage of coins to consider for your next investment.
At this point, you have some baseline information about the best cryptocurrencies to invest in. What’s important is that you do your research and identify the coins whose underlying technology, past track record, and potential for future growth match up well with your investment style.
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Gaby is a freelance writer and self-employed business owner with a personal interest in all things finance-related. She has a professional certificate in business, finance, and financial analytics, as well as experience working as a volunteer tax prep assistant with the IRS.