Cryptocurrencies are the latest craze in the world of finance and technology and they have made many a people millionaires. Before we get into the three best cryptocurrencies to invest in right now, let us first begin by understanding what cryptocurrencies are.
What Is a Cryptocurrency?
A cryptocurrency is a digital currency used to buy goods and services and is protected by a strong cryptographic system which makes it nearly impossible to counterfeit. Most cryptocurrencies are decentralized networks based in Blockchain technologies.
What Is Blockchain?
What is blockchain you must wonder. Well, blockchain is a type of database but unlike a normal database data stored in Blockchain is stored in blocks that are chained together. Each block has a unique header and is uniquely identified by it's unique block header hash. Every time new data is added onto the Blockchain, a new block is created on which the data is stored.
Now that we fully understand what Blockchain technology and cryptocurrency is let us get into the three best cryptocurrencies to invest in.
Bitcoin is the most famous cryptocurrency out there, and is the god father of cryptocurrencies since it is the oldest. Its original author is Satoshi Nakamoto with It's ledger start being 3rd January 2012. There are currently approximately 18,754,431.25 Bitcoin in circulation with the supply limit of Bitcoin set at 21,000,000 Bitcoin. This means that once 21,000,000 Bitcoin have been mined no more Bitcoin shall ever be mined.
It's market capitalization is $628.25B with a single Bitcoin's price being $33,514.98. That translates to Ksh.67,788,175,000,000.00 for it's market cap and Ksh.3,616,257.71 as it's price. Now don't worry, you do not have to necessarily buy one Bitcoin. The marvel of cryptocurrencies, Bitcoin included, is you can buy a piece equivalent to the amount of money you wish to spend on the cryptocurrency.
Why Invest in Bitcoin?
Bitcoin offers great liquidity, this is so for cryptocurrencies in general. You can easily exchange Bitcoin for cash or other assets such as gold instantly with incredibly low fees.
Unlike traditional currency, Bitcoin is immune to inflation. The number of Bitcoin to be produced is caped and it is not centrally controlled by any given entity. This means that your Bitcoin will not loose value over time. If the past is anything to go by, the opposite is true; Bitcoin will increase in value as time goes by. Add to this the fact that in a few years no more Bitcoin shall be mined and Bitcoin becomes a rare commodity, thus it's value shall rise as it's demand rises.
Since Bitcoin trading is relatively young, it is prone to unpredictable swings in price and volatility. While some may see this as a vice it is quite the opposite actually. This volatility means the creation of new opportunities to gain massive gains if we'll exploited.
Ethereum is the open source Blockchain network on which the cryptocurrency Ether sits on. Its original authors are Vitalik Buterin and Gavin Wood. It's initial release was 30th July 2015.
Ether is the largest cryptocurrency by market capitalization after Bitcoin. Its market capitalization is $245.14B with a single Ether token going for $2,101.28. That translates to a market cap of Ksh.26,450,606,000,000.00 and one Ether token costing Ksh.226,728.11.
Why Invest in Ethereum?
Ethereum is the next largest cryptocurrency by market cap after Bitcoin. If you fancy something different then this cryptocurrency is for you.
Ethereum 2.0, new upgrades to the Ethereum Blockchain; first phase released 1st December 2020, is set to make the Ethereum Blockchain more energy efficient than most cryptocurrencies out there. Cryptocurrencies have been known to be rather energy intensive and Ethereum 2.0 promises to make the Ethereum Blockchain be energy efficient. This will give it a competitive advantage and leg up over other cryptocurrencies.
As compared to Bitcoin, the Ethereum Blockchain has more utilitarian functions as compared to Bitcoin. Applications such as Decentralized finance (DeFi) and non fungible tokens are built upon the Ethereum Blockchain.
All the above give the ether token a leg up thus boosting it's value and making it a worthwhile investment.
Litecoin is an early Bitcoin spinoff or altcoin that was started in 7th October 2011. Its original author was Charlie Lee.
In technical details, Litecoin is very similar to Bitcoin. What makes it different then you ask, well as compared to Bitcoin Litecoin transactions take a much shorter time; 2.5 minutes compared to Bitcoin's 10 minutes. Litecoin transactional fees are also much lower as compared to those of Bitcoin.
Litecoin's market capitalization is $9.02B with a single Litecoin going for $135.03. That translates to a market cap of Ksh.973,709,000,000.00 and a single Litecoin costing Ksh.14,576.49.
Why Invest in Litecoin?
When compared to Bitcoin, Litecoin's transactions take a much shorter time i.e 2.5 minutes while those of Bitcoin take 10 minutes. This speed suggests that Litecoin may be easier to scale up in the future.
Litecoin transactions are not only faster than Bitcoin's but are also a lot cheaper. A Litecoin transaction fee costs an average of 2.5cents (Ksh.250) while those of Bitcoin cost approximately $4.38 (Ksh.438).
Just like Bitcoin, Litecoin has a maximum supply of 84 million Litecoin tokens. This therefore protects Litecoin from inflation thus making it safe for long term investment.
How Do I Invest in Cryptocurrencies?
Now that we have three cryptocurrencies we are interested in investing in, how do we go about actually investing in them? Worry not, it is not a complicated process.
To invest in cryptocurrencies you will first of all need to own one. You will need a "wallet" ( an app on the internet where you shall hold your cryptocurrencies). You can create wallet by creating an account on any exchange e.g Coinbase, Binance, Huobi etc.
Now that you have your wallet, you will need the cryptocurrencies themselves. You can buy these in the exchanges. You do so by exchanging cash for a cryptocurrency coin/token equivalent to the value of the cash you've given. Congratulations you are now the proud owner of the money of the future.
Now in order to turn a profit from your cryptocurrencies you can go about it in two ways; either through day trading or long term investing.
In day trading, you buy the cryptocurrency at a given price then through careful analysis of the market, proper consideration and good timing you sell the cryptocurrency hopefully at a higher price in order to turn a profit. This can be done once a day or multiple times a day.
Long term investing on the other hand involves the buying of cryptocurrencies and holding them for an extended period of time with the aim of selling them in the future at a higher price for profit.
There you have it, three cryptocurrencies to invest in right now and how to go about it. I will do a deep dive on these cryptocurrencies and their underlying technologies in a later piece, so definitely stick around for more. I also urge you to further read up on the cryptocurrency(s) of your liking before heavily investing in it for as the wise say knowledge is power.
Share with me in the comments below your favourite cryptocurrency, leave a like if you enjoyed this article and while you are at it follow me too for more sensational content. Adios muchachos.
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