Cryptocurrencies have gone from being a hobby to a major player in the financial world. You must know the landscape of top cryptocurrency to in whether you’re an old pro or a newbie. In this guide, we’ll cover the top cryptocurrency to invest in, the pros and cons of cryptocurrency, investment strategies, and in-depth info on Bitcoin, Ethereum, and Dogecoin. We’ll also include:
- Market cap data.
- Year over year returns.
- How to report crypto on taxes.
What are Cryptocurrencies?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and run on blockchain technology—a distributed ledger that records all transactions across a network of computers.
Key Features of Cryptocurrencies:
- Decentralized: No one controls the currency so that no government can interfere.
- Transparent: All transactions are on a public ledger, so they are transparent.
- Secure: Cryptocurrencies use cryptography to secure transactions, so they are fraud-proof.
Top Cryptocurrencies to invest in
2024 and up, thousands of cryptocurrencies, but a few have risen to the top due to market cap, tech, and adoption.
Best Investment Apps to Start Investing
Bitcoin (BTC)
- Market Cap: $1.1 trillion
- Year-over-Year Return: 90%
Overview: Created in 2009 by Satoshi Nakamoto, Bitcoin is the original cryptocurrency and the most valuable. It runs on a proof-of-work blockchain, which is secure but energy-hungry. Bitcoin is “digital gold,” so it’s a popular choice for investors looking for a store of value.
Investment Prospects: Limited supply (21 million) and institutional adoption make it a long-term hold.
Ethereum (ETH)
Market Cap: $295.5 billion
Year-over-Year Return: 35%
Overview: Ethereum is a cryptocurrency and decentralized platform for smart contracts and decentralized applications (dApps). It’s the foundation of the booming DeFi and NFT space. Ethereum has recently transitioned from proof-of-work to proof-of-stake, which has reduced its environmental impact, making it more attractive to eco-conscious investors.
Investment Prospects: Ethereum’s versatility and ongoing development make it a good investment, especially for those interested in the broader blockchain space.
Tether (USDT)
Market Cap: $114.6 billion
Year-over-Year Return: 0%
Overview: Tether is a stable coin pegged to traditional fiat currencies like the U.S. dollar. This stability makes it less volatile than other cryptocurrencies, making it a safe haven during market downturns.
Investment Prospects: Tether is not an investment for high returns but a tool for traders to quickly enter and exit volatile assets.
Finance Coin (BNB)
Market Cap: $69.4 billion
Year-over-Year Return: 97%
Overview: Launched as a utility token for the Binnacle exchange, BNB has expanded to payment for transaction fees on Binance, trading, and even booking travel arrangements.
Investment Prospects: BNB’s performance and use cases make it a good investment as Binance grows its presence in the crypto space.
Solana (SOL)
Market Cap: $64.9B
Year-over-Year Return: 509%
Overview: Fast transactions and low fees with PoH and PoS. Favorite among developers building apps and smart contracts.
Investment Pros: Solana is a strong competitor to Ethereum. Suitable for Deify and daps.
Pros and Cons of Cryptocurrency Investments
Cryptocurrency investments have risks but also benefits. Here are the pros and cons:
Pros
- High Returns: Cryptocurrencies, especially newer altcoins, have the potential to deliver significantly higher returns than traditional assets, offering an exciting investment opportunity.
- Decentralized: The absence of a central authority means less government control and the potential for use in countries with unstable local currencies, providing a sense of reassurance to investors.
- Liquidity: Major cryptocurrencies like Bitcoin and Ethereum are highly liquid, making them easy to buy and sell without significantly impacting the market, instilling confidence in investors.
- Innovation: The underlying tech has use cases beyond finance, supply chain management, voting systems, etc.
Cons
- Volatility: Cryptocurrencies are volatile and can lose significance in a short time.
- Regulatory Risks: Governments are still figuring out how to regulate legal challenges and uncertainty.
- Security: While the blockchain is secure, the rest of the ecosystem (exchanges and wallets) can be hacked and fraudulent.
- Complexity: Understanding the tech and market takes time and effort and is unsuitable for newbies.
How to Invest in Cryptocurrencies
Investing in cryptocurrencies is more than just buying and holding. Here’s how:
Pick an Exchange
First, you need to pick a cryptocurrency exchange. Coin base, Binance, Kraken etc. Consider security, user experience, fees, and the number of cryptocurrencies available.
Secure Your Investments
Once you buy cryptocurrency, you need to store it safely. Exchanges have built-in wallets, but for long-term storage, a hardware wallet (cold storage) is recommended to protect your assets from hacks.
Diversify Your Portfolio
Just like traditional investments, diversification is key in cryptocurrency. To reduce risk, consider spreading your investments across multiple cryptocurrencies. For example, a mix of stable coins, established coins like Bitcoin and Ethereum, and promising altcoins can be a good approach.
Stay Up To Date
The cryptocurrency market moves fast; regulatory news, technological advancements, and market sentiment influence prices. Follow reliable news sources and consider joining cryptocurrency communities on Reddit and Twitter.
Long term vs. Short term
Decide if you will hold your investments long-term or trade more actively. Long-term holders (often called “Holder’s”) believe in the future of cryptocurrencies and are willing to ride out short-term volatility. Active traders try to profit from market fluctuations for quick gains but must be more involved and knowledgeable about market trends.
How to Buy Cryptocurrency: A Comprehensive Guide for Beginners
More Specific Cryptocurrencies
Beyond the top coins, there are a few others to consider:
Dogecoin (DOGE)
Market Cap: $13.9 billion
Year-over-Year Return: 30%
Overview: Originally created as a joke, Dogecoin has built a strong community and gained mainstream attention, partly due to celebrity endorsements like Elon Musk. Its no-max supply can lead to inflationary pressure in the long term.
Investment Pros: Its low price and strong community make it a speculative but popular investment, especially for those new to cryptocurrency.
Cardanol (ADA)
Market Cap: $11.6 billion
Year-over-Year Return: 10%
Overview: Founded by one of Ethereum’s co-founders, Cardanol is a proof-of-stake blockchain that aims to be more secure and scalable than its predecessors. It’s designed for building decentralized applications and smart contracts.
Investment Pros: Its scientific approach and focus on security make it a good long-term play as it rolls out new features and capabilities.
XRP (XRP)
Market Cap: $28.1 billion
Year-over-Year Return: -19%
Overview: XRP is the coin of the Ripple network, which is trying to make fast and cheap cross-border transactions. The ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) is affecting XRP’s value.
Investment Prospects: Despite the legal issues, XRP is still a popular choice for those interested in cross-border payments. Its future will depend on the outcome of the legal issues.
Risks and Rewards
Cryptocurrencies offer high returns but also high risks. Understanding these will help you make informed decisions.
Market Volatility
Cryptocurrency prices are very volatile; values can swing wildly in short periods. This volatility can mean significant gains but also big losses. Be prepared for this risk, and invest only in what you can afford to lose.
Regulatory Uncertainty
The legal status of cryptocurrencies varies by country and is changing. Governments can introduce new laws that can impact their value and usability, adding another layer of risk.
Security Risks
While blockchain is secure, the rest of the ecosystem, including exchanges, wallets, and smart contracts, can be vulnerable to attacks. Store your cryptocurrencies securely and be aware of scams.
Technological Risks
The technology behind cryptocurrencies is still new and evolving. Bugs, technical failures, or unexpected issues can impact your investments. Quantum computing is a future threat to the cryptographic security of most cryptocurrencies.
Cryptocurrency Investment Strategies
Investing in cryptocurrencies requires a plan. Here are some:
Dollar Cost Averaging (DCA)
DCA invests a fixed amount of money at regular intervals regardless of the price.
Holding
“Holding” means holding onto your crypto long-term despite market fluctuations. This is based on the idea that crypto will go up in the long run, no matter what happens in the short term.
Diversification
Spreading your investments across multiple cryptos reduces risk. Diversifying your portfolio makes you less likely to get struck by a single asset performing poorly.
Staking and Yield Farming
Staking is participating in a proof-of-stake network by holding and locking up your crypto in a wallet to support the network. You get rewarded. Yield farming is a more advanced strategy in which you lend your crypto to earn interest or additional tokens.
How to Report Cryptocurrency on Taxes
Cryptocurrency is considered a capital asset by many tax authorities, like stocks. Here’s what you need to know about reporting crypto on your taxes:
Capital Gains
You must report the gain on your taxes if you sell crypto for more than you paid. The tax rate depends on how long you hold the crypto—short-term gains (held for less than a year) are taxed higher than long-term gains.
Reporting Losses
If you sell crypto at a loss, you can use that loss to offset other capital gains or even a portion of your regular income, depending on local tax laws.
Receiving Cryptocurrency as Income
If you receive crypto as payment for goods or services or through mining, you must report its fair market value as income.
Record Keeping
You must keep detailed records of all your crypto transactions, including dates, amounts, and the value of your local currency at the time of each transaction. This is key to reporting your taxes accurately.
Stay Up to Date with Cryptocurrency Trends
The crypto market is constantly changing, with new developments and trends increasing. Here are a few ways to stay in the know:
Follow Industry News
Check out reliable news sources like Coin Desk, Coin Telegraph, and Bloomberg for the latest on the crypto market.
Join Cryptocurrency Communities
Reddit, Twitter, and Telegram have active crypto communities where you can learn from others, share your thoughts, and stay updated with the latest trends.
Check Market Data
Use CoinMarketCap or Coin Gecko to monitor accurate time prices, market caps, etc.
Attend Webinars and Conferences
Attending cryptocurrency webinars and conferences can give you valuable insights and help you connect with industry experts and fellow investors.
Conclusion
Cryptocurrencies are the new frontier in finance if you are willing to navigate the complexities. By understanding the top cryptocurrencies, their risks and rewards, and practical investment strategies, you can make informed decisions that align with your financial goals. Whether you are a long-term investor or looking for short-term gains, staying informed and alert is key to success in the ever-changing world of cryptocurrency.
