Understanding what assets are is pretty straightforward, but what about digital assets? Well, digital assets are anything that you own in digital form, including graphics, animations, video, or audio. Let us look at the major features of any digital asset:
- A file that is owned by a company or an individual
- They hold value for the individual or an organization having it
- Exists with metadata which makes it searchable and discoverable
Similarly, cryptocurrency is a digital asset that is distributed across computers through a network. It has a decentralized structure, and is thus never within the jurisdiction of any government or central authority.
Blockchain technology is responsible for giving birth to such a unique system that does not abide by any currency laws and operates at its own will. These virtual currencies are underpinned by cryptographic systems that can be used without any third-party intervention.
A cryptic and complex algorithm and techniques safeguard the currencies and their entries.
Cryptocurrency can either be purchased from exchanges or mined. It is a comparatively newer form of currency and a lot of countries, companies, and websites are beginning to consider it a legitimate method of payment.
One could say that cryptocurrency is the future of payments and we cannot deny it. A lot of research is currently being engaged in its mining and study.
If you are looking at cryptocurrency from an investment point of view, then you must know about the best ones. In the ocean of cryptocurrencies, knowing which ones work the best will help you make the right choice.
Current Scenario of Cryptocurrency in India
The cryptocurrency market in India is a highly volatile one, and thus one must always be alert to the rise and dips in the market. Recently, a bullish tendency (the tendency to rise) has been noticed in the crypto market (July 8 recorded high gains). The market cap rose to 6% and Bitcoin is back in its element. The value of the crypto market has increased by around 12% and has been somewhat stable since then with minor volatility.
However, as we mentioned, it is an extremely volatile market and anything can happen here. A lot of factors contribute to the value of each currency (to which we will arrive shortly) and since they work in and as a chain, it is almost a domino situation here. If one falls, the others are not far away. In some cases, it could also trigger an opposite result. Either way, it is important to keep your ears and eyes open.
Having substantial knowledge of cryptocurrency will help your case further. It aids you in understanding the nerve of the market and predicting its future.
Reasons for Volatility
Price Discovery Stage:
Cryptos are competitively new and that is a major reason behind their volatility. Moreover, it is the first of its kind, and thus will take time to settle in the market and be accepted. Investors and market specialists are all trying to assign a somewhat stable value to it, but it is still in its stage of price discovery.
Lacks Controlling Agent:
Cryptos, unlike other assets, do not fall under a particular controlling body like bonds and fiat currencies. The lack of any regulatory framework makes it act whimsically. It is always not a disadvantage and investors like to churn the best out of its anonymity and resultant volatility.
Some of the top-rated cryptocurrencies are in limited supply, and thus there comes demand and supply dynamics into play. This digital asset sets its price almost entirely on the laws of supply and demand.
Despite its high volatile nature, people love to invest in cryptos as it also means high returns. Thus, several people buy a chunk of it which makes the market even more volatile.
How to be a Smart Investor in Crypto?
Crypto is the new hot market for investments mainly because of its volatility. It is not meant to be a safe and medium returns market, and therefore when investing in Crypto, you are majorly looking at a big return. But, volatility is a two-edged sword, and thus must be handled very wisely.
It is a market that requires its investors to be extremely smart and alert. And with cryptocurrency in India still being mostly unregulated and understood very less, here are some tips for smart investment:
Do Your Research:
Research is non-negotiable when it comes to crypto investments. Know your currencies and look at their history and market trends. Try to look for connections between the coins and other factors that might affect their valuation. An in-depth study and analysis of the market and currencies will help you make well-informed decisions. Investing in crypto without knowing much about it could incur large losses.
Do Not Trust all the Din and Sound:
The first sign of a smart investor is that he/she does not rely on noise and hype. While it is useful to keep your ears open, you must also use your abilities to assess and calculate before making a decision.
Try to seek help from experts and not just any random investor. Make investments based on calculated risks. The market might just crash crazily anytime, leaving you with little or nothing. Get your knowledge from a reliable source and sharpen your analytical skills instead of relying on others. Most importantly, spend more time studying the market than other people's investments.
Compartmentalize Your Investment:
Investing all in the same place is a very bad idea, whether it is stocks, mutual funds, or cryptocurrency. Spread out your investments in proportions across cryptocurrencies to reduce risk. This way, if any one or two currencies crash, you still have some other to recover from.
Know Your Loss Limit:
Cryptocurrency is not meant for people with weak nerves as, at some point or the other, you will have to deal with the volatility of the market. Thus, when investing in this particular market, know how much you can risk. Once you start losing money below your risk level, it is best to withdraw.
Top 5 Cryptocurrencies
The list of cryptocurrencies is a long one, but we have sieved out thebest cryptocurrency to invest in, that have displayed immense potential in the past and still reign the market. These include:
Bitcoin - Often termed the pioneer of cryptocurrency, Bitcoin is one of the most popular currencies and is counted among the best cryptocurrency to invest.
Bitcoin came into existence in 2008 during the Great Recession. People began doubting banks and their financial system. On 3rd January 2009, the first block, called genesis block, was mined and blockchain was launched.
A week later, the first transaction took place. Initially, it was obtainable by miners alone and had no real monetary value. The first economic transaction took place on May 22nd, 2010. And soon, more transactions followed on internet forums. People bartered goods and services for Bitcoin.
Coders and miners started to improve the technology and code behind Bitcoin and slowly, it came to the market as we know it today.
Ethereum - Everyone knows about Ethereum as it is one of the most widely used currencies and is often regarded as the best cryptocurrency to buy.
Programmer Vitalik Buterin bags the credit for conceiving Ethereum in 2013. In 2014, founders Gavin Wood, Anthony Di Lorio, Charles Hoskinson, and Joseph Lubin began the developmental work. The project was crowdfunded and went live on the 30th of July, 2015.
Ethereum has one of the best codes and designs. Since then, Ethereum has been among the most popular currencies.
Tether - It is quite an unnatural cryptocurrency in the sense that it is a stablecoin and is backed by fiat currencies.
The brainchild of Craig Sellers, Brock Pierce, and Reeve Collins, Tether was founded in July 2014 as an attempt to address two problems of cryptocurrencies, namely convertibility and high volatility. Therefore, it had a fixed exchange ratio with the US dollar, 1:1. The idea was to bridge the gap between banks, traditional currencies, and cryptocurrencies.
To date, it maintains a stable ratio, and is thus considered the safest in terms of volatility. However, due to the failure to produce audited financial statements, it is no longer backed by US dollar deposits. Instead, it is 100% backed by the reserves.
Binance Coin - Binance is issued by one of the largest crypto exchanges that go by the same name.
Binance Coin is used to pay fees and trade on the Binance cryptocurrency exchange. It is the largest exchange in the world and records over 1.4 million transactions per second. That is insane! But, it is true.
Binance Coin was founded in 2017 and at first, had no blockchain of its own and worked on the Ethereum blockchain. But, soon after its success, it became a part of Binance's blockchain.
Ripple/XRP - It is another loved currency and can be used in several transactions across the globe.
In 2011, Jed McCaleb, Arthur Britto, and David Schwartz started developing XPR Ledger. Their major source of inspiration was the iconic Bitcoin, but they aimed to create a better version with lesser limitations. Their goal was to come up with a digital asset that would be used majorly for payments and would be more sustainable.
The currency was launched in 2012 and soon started a company today known as Ripple. Its journey covered several milestones and today stands among the best cryptocurrency to invest in.
Why are They Popular Among Investors?
Bitcoin is popular among investors and is touted as the best cryptocurrency to invest in for several reasons:
- It is a veteran currency
- Has a geographically well-distributed chain of miners
- It has performed well in the past
- It bounced back well after its abysmal downfall during the pandemic
- Experts predict it will rise again soon
Reasons for Ethereum's popularity:
- It helps people target sponsorships
- It is becoming increasingly famous, which can manipulate its price to a higher value
- It is uncapped
Tether, as we already established, is a different kind of cryptocurrency, but it is no less popular. Here's why:
- You can easily swap other cryptocurrencies for Tether
- Adds stability and flexibility to your investment portfolio
- Lower transaction fees and can be sent anywhere across the globe
- It is stable and does not come with too high a volatility rate
Binance Coin is popular due to the following reasons:
- Has lower fees
- It is faster
- It is somewhat centralized but does not perform outside the catalog of other cryptocurrencies
XRP is popular because:
- It is faster
- It is cheaper
- Has a supply of 100 billion tokens
- Crypto will play a strong role in the future of finance. Sounds unlikely? Hear us out! Several major banks are collaborating with crypto clients like Zcash and JPMorgan. Bank of America is also developing its cryptocurrency. And, other banks are not too far behind.
- If you are inclined towards investments, crypto gives you a great chance to reap large chunks of profit. Even bigger than the most volatile stock markets.
- Several large cryptocurrencies are finding their way into the present financial structure.
- If you are not aware and knowledgeable about cryptocurrency, then it could cost you soon.
- It helps you land jobs in the fintech industry or financial institutions. If you are already working in a similar organization, then it will sharpen your skills and make you eligible for a promotion.
- Finally, blockchain technology is being exploited at its best and shows excellent potential.
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