Investing in virtual currencies, also known as digital currencies, is like making financial investments in the stock market. Whether it's for the long term (hold strategy) or the short term (trade strategy), investing in cryptocurrencies in 2021 is a practice that is becoming more democratic, with the arrival of promising currencies and a market capitalization that could well climb.
Which cryptocurrency should you invest in 2021?
Which cryptocurrency should you invest in 2021? There are thousands of virtual currencies between Bitcoin, Ethereum, and even Nano. Find below the main existing cryptocurrencies and their market capitalization in March 2021:
| Name | Market capitalization | Number in circulation |
|---|---|---|
| Bitcoin (BTC) | + de 900 Billion euros | 18,6 M |
| Ethereum (ETH) | + de 170 Billion euros | 114 M |
| Ripple (XRP) | + de 19 Billion euros | 45,4 Mds |
| Bitcoin Cash (BCH) | + de 9 Billion euros | 18,6 M |
| Tether (USDT) | + de 35 Mds Billions euros | 24 Mds |
| Litecoin (LTC) | + de 11 Billion euros | 66,3 M |
The most popular
First and foremost, investing in cryptocurrency is a relatively dangerous activity for your finances: there is no certainty about the gains made by any particular investment, and many buyers lose their stake. That's why the main advice in investing like this is not to bet all your capital on one crypto asset.
Want to invest in Bitcoin or another virtual currency? Prioritize the most popular cryptocurrencies, so they are the most capitalized. At the top of the list, and no real surprise: Bitcoin.
Historically the first virtual currency created in 2008, in response to the economic crisis that hit the world, Bitcoin (BTC) remains the safest value to invest in. In the stock market valuation of more than 145 billion US dollars at the beginning of 2020, Bitcoin is undoubtedly the main currency of the financial market.
Hot on its heels is Ethereum (ETH), the pioneer of Decentralized Finance (Defi), which actually has more users on its blockchain than the king Bitcoin! With the rollout of the next-generation Ethereum scheduled for 2021, the crypto asset is looking to tap into another dimension, and why not come and titillate its leader.
Who to complete the podium? Nano (NANO) and a large number of transactions possible per second is becoming more and more attractive, but its value was severely eroded by the hacking attack it suffered in 2018. Or the tezos (XTZ), which relies precisely on the security and rigor of its program to offer investors attractive returns. Or Basic Attention Token (BAT), which surpassed 10 million active users at the end of 2019.
Of course, you'll need to do your own research for each of these digital currencies and study the cryptocurrency price before buying Bitcoin or any other crypto asset. Click here to learn more about this topic.
Where to buy cryptocurrency?
To buy cryptocurrency, there are several solutions available to you:
- Specialized marketplaces: interface to connect sellers and buyers of cryptocurrency, which takes a commission on the transactions made. Suitable - for experienced investors.
- Peer-to-peer: since blockchain technology allows cryptocurrency to be exchanged without a third-party supervisor, it is possible to buy Bitcoins from an individual with ease. Several websites allow these transactions.
- Transaction facilitators: interlocutors of peers, they accompany and advise users while offering the sale of cryptocurrency on a platform.
What's new in the world of cryptocurrency
Why might 2021 be the perfect year to invest in cryptocurrency? The vast majority of cryptocurrencies have had their value indexed to that of Bitcoin in 2020. And, since this virtual currency has a limited quantity (only 21 million Bitcoins), its value depends on the difference between its supply and demand.
It is important to understand, first of all, that the increase in value of Bitcoin is mechanical: it is expected that the creation of Bitcoins (known as mining) is halved every four years, which is the time needed to mine 210,000 blocks. At its inception, miners received 50 BTC per mined block.
In 2012, this 50 BTC per block was reduced by half, to 25. In 2016, another reduction: 12.5 BTC are delivered per mined block. As you can see, 2020 marks the third reduction, to 6.25 BTC per block. Fatally, the value of Bitcoin climbs, as it did in 2013 and 2017 after the first two changes: less BTC mined means an increase in its demand, and therefore its value.
Buying Bitcoins in 2021 could thus allow you to create a portfolio of crypto assets that will increase in value as the number of mined BTCs decreases.
Another reason to invest in cryptocurrency in 2021 is the arrival of the giant Facebook in the race. By the end of 2021, Diem (ex-Libra), the virtual currency of the Facebook group, should land to offer a means of payment already accepted by Uber, Whatsapp, Spotify, eBay... Thanks to the Calibra application, which will serve as a virtual wallet to store his Diems, the user can transfer money to another peer via different applications (PayPal and Lydia in particular).
How to invest in cryptocurrency?
Precautions
It is very important to go back to one of the key points of investing in cryptocurrency: risk appetite. Crypto assets such as Bitcoin, Basic Attention Token, or even Nexo all carry the risk of loss. So be prepared to lose your entire stake in the worst-case scenario!
It is strongly advised to learn in detail about how the cryptocurrency financial markets work, the related decentralized applications, or even each of the crypto assets you wish to acquire. Entering an online community (typically on Reddit or Slack) also allows you to interact with other users and learn more about the pros and cons of investing in cryptocurrency.
Investing in a cryptocurrency will then be easier if one goes to forums and get a better insight into the opinions of investors in 2018, 2019, and 2020.
The curated strategy
When it comes to investing in crypto assets, there are two strategies favored by experts. The first is to buy Bitcoins or any other cryptocurrency and store them in a virtual safe (it is not advisable to let your crypto assets sleep on an account created on a platform, they will always be safer on a hardware wallet). This is called the hold.
It will be up to you to decide when you will sell all, or part, of your assets in order to make a profit. The goal will be to set targets in advance, for example not to sell a crypto asset below a certain amount.
Trading
If you're familiar with how the stock market works, there will be no secrets for you here. Regular buying and selling of crypto assets are reserved for investors who know the system and the financial markets inside out. The goal? Over a short period of time, to buy assets when their value is at the bottom of a curve (which undergoes a decline) and resell them when their value climbs.
To keep abreast of changes in the value of crypto assets on the market, investor traders have several tools at their disposal:
- Real-time charts and data are available on many websites,
- The news: many events can disrupt the evolution of the value of a cryptocurrency (epidemic, war, etc.).
- The nature of the cryptocurrency itself: whether it is rare or common, innovative or secure, the crypto asset you wish to acquire must stand out from its competition to be profitable in the long run.
Bewarelike sports betting or gambling, it is important to keep a cool head. Losing part of your investment? There is no point in rushing to buy cryptocurrencies: irrational mistakes are the most costly!
Frequently Asked Questions
What can you buy with Bitcoins?
Some online platforms like PayPal accept cryptocurrency as a payment method to pay for your purchases. You can also use your Bitcoins to bet on another cryptocurrency.
Can you invest in cryptocurrency in Islam?
Are cryptocurrencies against the precepts of Islam? Investing in cryptocurrency, is it halal (lawful)? Initially, it should be noted that the Muslim religion condemns any form of speculation and interest, but not trade.
Thus, Bitcoin and other cryptocurrencies, as virtual currencies, can, according to some scholars, be used to pay for a good or service. On the other hand, investing in Bitcoin in trading is prohibited, since the goal is indeed to ensure profitability with each purchase and resale.
What is zynecoin?
Originally called zeencoin, zynecoin is a pseudo subclass of cryptocurrency that turned out to be a scam. It is a token evolving on a third-party blockchain attached to Ethereum. Created by Karim Benabdelkader in 2017 with the aim of supporting business creation in Africa, this token has been singled out for its lack of transparency and promises of dubious gains.
How does a cryptocurrency gain value?
In order to gain value, a cryptocurrency must meet various criteria. It must manage to penetrate the real economy: its users must have the ability to use this currency in their daily life.
On the other hand, this allows establishing a degree of trust which also has its importance in the value of the cryptocurrency. Indeed, if a large number of users invest in a cryptocurrency, its evolution is certain.
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