Bitcoin, the most well known cryptocurrency and arguably the current gold standard for cryptocurrency investments, appreciated over 1,300% in 2017. However, more than a dozen other cryptocurrencies outperformed Bitcoin with gains ranging from 3,300% up to Ripple’s astounding 36,000% gain during the same time period.
Since then, crypto enthusiasts have been trying to figure out the next bitcoin or best cryptocurrency to get their hands on. Typically, altcoins are higher risk investments when compared to Bitcoin, but they often provide higher returns in a bull market. Take a look at our list of the best cryptocurrencies for 2021 and start investing in the future of finance (DeFi) today.
Best Cryptocurrencies to Buy:
- Best Store of Value: Bitcoin (BTC)
- Holds Most Market Enthusiasm: Ethereum (ETH)
- Best Layer 2 token: Polygon (MATIC)
- Best for High-speed Transfers: Stellar Lumens (XLM)
- Best Alternative to Ethereum: Cardano (ADA)
- Best for Growth Potential: Chainlink (LINK)
What are the Best Cryptocurrencies?
The best cryptocurrencies today are not just currencies, they’re native assets to some of the most promising startups and projects in the financial world today. For Mark Cuban and Andreesen Horowitz, decentralized finance (DeFi) investments have been the most popular crypto investments of the year. Here are some of the most promising, VC-backed, DeFi cryptocurrencies to buy in 2021.
1. Bitcoin (BTC)
The king of all cryptocurrencies, Bitcoin was first and is the most well-known cryptocurrency on the market. It also benefits from the largest market cap and is among the most highly traded cryptocurrency, assuring liquidity to investors. Bitcoin is the king when it comes to retail and institutional adoption, leading all other cryptocurrencies in terms of acceptance as a both a store of value and payment medium.
Considering the price of bitcoin is down 50% from its all time highs of over $64,000, buying now may be a good investment for the future. There will only ever be 21 million bitcoin in existence (with about 15% of this number being lost), so as long as Bitcoin’s user base continues to grow, so will the price of the asset.
2. Ethereum (ETH)
As the currency and platform that made “smart contracts” part of the cryptocurrency market’s vocabulary, Ethereum has seen massive gains since its introduction in 2015. Currently trailing only Bitcoin in regard to market capitalization, Ethereum has become one of the most widely discussed cryptocurrency projects in the world.
A consortium of some of the biggest names in the business, including Microsoft, Intel, Chase, and J.P. Morgan are building business-ready versions of the software that drives Ethereum. With momentum and market enthusiasm behind the Ethereum project, there’s no reason to think Ethereum has run its course and investors should consider Ethereum as part of a cryptocurrency portfolio. Ethereum is available on Coinbase, Gemini, and Binance.US
3. Polygon (MATIC)
Polygon is an Ethereum sidechain that is scaling DeFi at a rapid rate. Ethereum’s high gas fees have highlighted the networks struggle to upgrade to Eth2. Ethereum co-founder, Vitalik Buterin, has expressed his support for Layer 2 scaling solutions, which handle the burden of proccessing smart contracts on a seperate blockchain network, and submit the results to the layer 1 Ethereum chain to harness the best of scaling and Ethereum’s decentralization and security.
Layer 2 sidechains are certain to bolster the Ethereum ecosystem in the future, and Polygon is one of the first to do it. Assets must be bridged to the any sidechain, so there are some switching costs that will lead to people sticking around on Polygon long-term. Polygon is available on Coinbase, Gemini, and Binance.US.
4. Stellar Lumens (XLM)
Stellar Lumens diverges from much of its cryptocurrency competitors in a number of ways. Its goal is to be the go-to cryptocurrency for payments, using technology that allows for quick and inexpensive transactions.
The project aims to allow retail and institutional investors to send digital representation of all forms of money. With the Stellar Lumens blockchain, users can send XLM, but the network also allows for users to send Bitcoin and fiat currencies anywhere in the world. Stellar is available on Coinbase, Gemini, and Binance.US
5. Cardano (ADA)
Cardano is one of Ethereum’s largest competitors. The project was founded by Charles Hoskinson, one of Ethereum’s past co-founders. The cryptocurrency is already proof-of-stake, a consensus algorithm that Ethereum is still in the process of migrating over to. Proof-of-Stake does not only allow for faster and cheaper transactions, but it is also environmentally friendly.
Ethereum beats Cardano on its DeFi (decentralized finance) ecosystem. Cardano has yet to release smart contracts on its platform, but the cryptocurrency plans to add this feature in 2021. Ethereum already has hundreds of decentralized applications on its platform, and the network has many more users than Cardano’s. Cardano is available on Coinbase, Gemini, and Binance.US.
6. Chainlink (LINK)
Chainlink (LINK) is an Ethereum token that powers the Chainlink decentralized oracle network. This network allows smart contracts on Ethereum to securely connect to external data sources, APIs, and payment systems.
Chainlink entered the market in 2014 under the name SmartContract.com. Shortly after its launch, the name changed to Chainlink to better represent the its core market.
Chainlink set up a strategic partnership with Google in 2019. The agreement secured Chainlink’s protocol within the Google smart contract strategy. This move was seen as a major win by investors as it allows users to connect to Google’s 2 most popular cloud services. Chainlink is available on Coinbase, Gemini, and Binance.US.
Best Cryptocurrency Exchanges
Some great cryptocurrency exchanges for beginners are Coinbase, Robinhood, eToro and Gemini. While Robinhood is a good choice if you already use the platform for stocks, the exchange doesn’t let you send or receive crypto on the app, limiting what you can do with your investment.
We recommend Coinbase to those just starting out in cryptocurrency. The platform is arguably the most secure way to purchase cryptocurrency, and the user interface is simple and easy to learn. Plus, Coinbase has a unique cryptocurrency conversion feature that let’s you swap between altcoins on its exchange for free. It also supports all 6 of the best cryptocurrencies on this list.
The 1st cryptocurrency was Bitcoin, invented in 2009 by a pseudonymous developer named Satoshi Nakamoto. The market doesn’t know the true identity of Satoshi Nakamoto, but the groundwork laid by the invention of Bitcoin paved the way for other digital currencies.
It also led to the growing acceptance of cryptocurrencies as both an investment opportunity and as a medium of exchange, a way to securely transfer money from one currency owner to another digitally and without the use of traditional banks or financial institutions.
Cryptocurrencies are designed to function as money, an alternative to the fiat currencies of the world, many of which are in various stages of erosion through inflation or are at risk of government seizure. Greece, a country with a 45% income tax rate, seizes over 900 bank accounts per day.
The island nation of Cyprus, a budding financial center, suffered the consequences of Greek debt defaults, forcing Cyprus’ government to seize depositor’s funds to remain solvent. Venezuela’s inflation rate is currently over 46,000%, which creates a financial crisis that threatens the survival of families in the country. Cryptocurrencies offer a hedge against inflation, especially in countries like Venezuela.
Advantages of Cryptocurrencies
Cryptocurrencies offer several advantages when compared with traditional banking, money transfers, and fiat currencies.
- Privacy. Many cryptocurrencies are designed with privacy in mind and obscure the identity of the sender and receiver of cryptocurrency funds. Only cash provides similar anonymity. It’s important to note that some cryptocurrency, like Bitcoin and Ethereum, are only pseudo-anonymous. Once one is able to attach a cryptocurrency address to your identity, they’re able to view all the transactions you’ve made with that crypto address.
- Decentralization. Cryptocurrency owners use a wallet to access their currency and receive or send funds from a specific wallet address that uses a secret key for access. Some also use an exchange to store currency, although the practice brings additional risk. The record of the currency exists on the blockchain with a copy stored on every full node, a computer that keeps a ledger locally and syncs with other computers online. Your money isn’t in a single bank, or even several. The decentralized nature of cryptocurrency ledgers makes cryptocurrencies less vulnerable to seizure or localized risks, like fires or hardware failures. The data isn’t just stored off-site, it’s copied worldwide to all full nodes.
- Scarcity. Bitcoin has a fixed supply. Over 17 million Bitcoin are in existence. However, only 21 million Bitcoin will ever exist. It’s built into the code for the currency. The fixed supply gives Bitcoin and other cryptocurrencies similar characteristics to gold, silver, or other precious metals that have historically been used as money. Unlike U.S. Dollars, British Pounds or any other fiat currency, after the full supply is in circulation, the supply will never grow, devaluing the currency’s buying power.
- Smart contracts. Some cryptocurrencies have a unique feature that can’t be duplicated with fiat currencies. Ethereum is among the best examples with its robust support for smart contracts” essentially programs that live on the blockchain and can be used to manage transactions as well as many other uses, some of which we may not have yet imagined. At a base level, these contracts can be used to replace arbiters or escrow and other financial services. Since smart contracts live on the blockchain, they’re an immutable and secure way to handle money.
- Cost of transfers. The cost associated with cryptocurrency transfers can be a pro or a con, depending on the type of currency, the type of transfer, and the speed of the transfer. Bitcoin, for example, can become expensive if you need fast clearance for a transaction. In some cases, costs are less problematic for less time-sensitive transactions. Other types of cryptocurrencies, such as Litecoin, are fast and inexpensive to transfer, leading to increased adoption of Ripple-based transactions and related technology by financial institutions.
Disadvantages of Cryptocurrencies
Cryptocurrencies come with a list of considerations that can help investors make safer investments. Since the blockchain industry is still in its infancy, most cryptocurrencies are highly volatile. This being said, some cryptocurrencies, like stablecoins, offer low risk investments with higher returns than riskier investments like real estate.
- Market adoption. Awareness for Cryptocurrencies is growing, but most of the focus has been on Bitcoin. Relatively few retailers accept cryptocurrencies for payment, but there are a few. Overstock.com announced in 2017 that they would accept cryptocurrencies as payment. Payments will be limited to Bitcoin, Ethereum, Litecoin, Dash, and Monero, giving the other 1,500+ cryptocurrencies the cold shoulder.
- Obsolescence. As many as 1,000 cryptocurrencies have failed already, with more currencies sure to follow. The most common type of failure is at the Initial Coin Offering (ICO) or shortly thereafter, with many coins finding a crowded market for coins with similar characteristics to existing offerings, causing skepticism among investors. In some other cases, the ICO itself was just a cash grab, with the founders running off with investor funds. Currently, ICOs are unregulated.
- Abandoned cryptocurrency projects. Most of the investment money for cryptocurrencies is focused on a relatively small group of coins. Without investor interest, projects can get abandoned, leaving investors with essentially worthless digital coins.
- Regulation risk. As it pertains to cryptocurrencies, regulation risk has two sides. In the U.S., cryptocurrencies are not regulated at a federal level, leaving states the option to introduce rules and regulations regarding cryptocurrencies or the blockchain technology that serves as the backbone for cryptocurrencies. On the other hand, some investors and finance experts have expressed concern over future regulation for cryptocurrencies, which could cause a drop in demand or eliminate demand altogether.
- Liquidity risk. Investors and lesser-known cryptocurrencies may find fewer buyers, creating challenges when looking to exit a position.
- Volatility risk. Few investment classes can rival cryptocurrencies when it comes to price volatility. Prices can rise or fall dramatically in a single day, making or breaking fortunes.
- 3rd-party risk. Mt. Gox, a Bitcoin exchange based in Japan, and the leading exchange worldwide in 2014 was hacked, leading to a loss of nearly half a billion dollars in Bitcoin. In total, an estimated 850,000 Bitcoins belonging to investors went missing, ultimately forcing the exchange into bankruptcy.
- Secure keys. Cryptocurrencies are often kept in a digital wallet, which is secured by a long code or a long series of words. Unlike your bank account or investment account, there is no recovery process available if you lose your password. Without your password, your cryptocurrency wallet and its contents are no longer accessible.
Features to Look for in Good Cryptocurrencies
- Adoption rate. Cryptocurrencies are highly speculative investments in the biggest gains are sometimes found among newly introduced coins or coins whose technology has found the market, as was the case with Dogecoin. More cautious investors may choose to look at adoption rate, focusing portfolio investment on cryptocurrencies that are currently used in real-world transactions.
- Market cap. In many ways, the market cap for a given cryptocurrency goes hand-in-hand with liquidity. Fledgling cryptocurrencies may not ever find the market, preventing investors from exiting the position profitably.
- Promising new technology. Ethereum and Polygon both owe their stratospheric gains in 2017 to the innovative technology built into their respective platforms, differentiating both cryptocurrencies from the crowded market of often similar offerings.
- Security or anonymity features. Technology such as smart contracts, found in Ethereum and several other cryptocurrencies make transactions more secure by enabling a set of rules for each transaction. Some cryptocurrencies like Monero place a strong focus on anonymity, obscuring the identity of the sender and receiver of funds.
- Industry utility. Ethereum and Polygon are again good examples of cryptocurrencies with utility beyond a simple medium of exchange. Ethereum is the base layer of the decentralized finance revolution, and Polygon is the layer 2 where transactions and smart contracts can execture at scale.
Final Thoughts on Best Cryptocurrencies
Cryptocurrencies and decentralized financial products are still in their formative years. If you’re new to cryptocurrencies, you may be better served by investing only risk capital and by building a portfolio of widely traded cryptocurrencies. Initial coin offerings can be tempting, particularly with the parabolic rises common to ICOs. Almost as common is a precipitous fall following the ICO.
More established currencies help to prevent some of the volatility and provide better liquidity than found with newly minted cryptocurrencies. It’s important to learn where a cryptocurrency can be traded and how big the market is for that cryptocurrency.
Many early investors have found themselves without a viable way to exit the position. If cryptocurrencies are here to stay, some very good opportunities are likely to exist among the most commonly traded currencies, while also minimizing risk due to abandoned projects or lack of liquidity.
Benzinga crafted a specific methodology to rank cryptocurrency exchanges and tools. We prioritized platforms based on offerings, pricing and promotions, customer service, mobile app, user experience and benefits, and security. To see a comprehensive breakdown of our methodology, please visit see our Cryptocurrency Methodology page.
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