Cryptocurrency was created as an alternative to fiat currency and the traditional financial system. The fundamental difference between digital money and sovereign fiat currencies is the absence of centralized governing bodies.
Features of investing in cryptocurrency
Cryptocurrencies are a long game. At first, few people took seriously the ambitious goals of the creator of Bitcoin. It took more than 10 years to go from the obscure entertainment of a handful of enthusiasts to the most effective asset and almost recognized means of payment. Long-term investors hold assets for years and decades.
This does not mean that you will not be able to exchange ETH to SOL or actively trade intraday. This means that you will need patience. Processes for the further implementation of blockchain technology and the increasing adoption of cryptocurrencies are gaining momentum. That is, there are more and more reasons to consider long-term investment in cryptocurrency as potentially profitable.
What coins can be included in an investment portfolio
Data on the number of existing cryptocurrencies becomes obsolete faster than the seasons change. It’s really hard to choose. Yes, Bitcoin is still the most influential and most attractive digital currency. It is deservedly considered the most reliable asset in its class.
At the same time, coins have already entered the market, which in some respects are significantly superior to Bitcoin. If you are interested in a promising altcoin, analyze how acceptable the ratio of potential profit and risks looks to you.
The most preferred for investment are coins from the TOP-30 by market capitalization. Most of them have been operating for a long time, which indirectly confirms the viability of the project. Also, a potential investor gets the opportunity to compare the actual pace of development of the project with the declared ones, to study the reaction of the coin to significant events, its behavior during bullish and bearish cycles.
Another non-obvious for a beginner plus of coins from the TOP-30 is their liquidity. For example, exchanging BTC to LTC at a favorable rate is much easier than quickly selling a little-known coin.
Due to its position in the market, Bitcoin remains the most popular cryptocurrency among investors. Now the king of the market is going through a difficult period, but in the longer term, his future looks quite optimistic. And the very idea of investing at a local minimum is much more justified than an impulsive purchase at the next maximum.
Ethereum is historically the first successful altcoin, holding the second position in the cryptocurrency ratings for a long time and steadily. The concept of Ethereum is radically different from the idea of Bitcoin. This is not only a cryptocurrency, but also a blockchain platform adapted for the creation and deployment of decentralized applications and smart contracts for various purposes.
Now the platform is in the implementation phase of the largest update in the history of cryptography. This decision was made due to the need to improve the security and performance of the platform. After the completion of The Merge process, analysts expect the price of the coin to resume growth.
Polkadot is considered one of the potential competitors of Ethereum. On the Polkadot platform, you can also deploy decentralized applications and smart contracts, but its developers have gone even further. Among the goals of the project is to create a link between disparate autonomous blockchains.
The integration of the crypto world will greatly simplify the exchange of assets and other data between users of different platforms. Combining into a coherent system will open up new opportunities for using the blockchain network.
The ambitious goals of the developers give grounds for optimistic expectations for the future.
Cardano is one of the coins that are called “Ethereum killers”. The fundamental difference between the platforms lies in the consensus mechanism. Cardano operates on the basis of the Proof of Stake algorithm. This algorithm outperforms Proof of Work in performance and reliability, and consumes less power.
Competition with the traditional financial system did not go and is not included in the plans of the creators of Ripple. The project is aimed at improving the work of traditional financial institutions.
XRP occupies a specific niche as an intermediary between fiat and digital currencies. In this area, it does not yet have strong competitors, which gives grounds for confidence in a fairly stable position of the coin on the market.