More people are showing interest in cryptocurrencies, a constantly growing asset and medium of exchange. As the Kyrrex CEO let me share with you our team`s industry insider opinion on cryptocurrencies as a worthy investment.
Cryptocurrencies continue making the headlines amid the increase in their exchange rate against the U.S. dollar. Naturally, more retail investors and funds are considering the addition of crypto to their portfolios or have done so already. At this point, I must take a small step back and make an important disclaimer: cryptocurrencies remain a highly volatile asset with a rapidly changing value. These changes could lead to substantial gains, as well as significant losses. Thus, a natural strategy would be allocating a small portion of the portfolio to different crypto assets.
Let’s consider specific cryptocurrencies that have the biggest chances to gain value over time. The two main approaches involve buying the largest cryptocurrencies because of their reliability, and seeking smaller ones that will gain value rapidly and stick around, hopefully, for the duration.
The easiest, and probably the most reliable approach, would be to consider the largest and the most prominent cryptocurrencies. In order to determine which ones, you may consider four characteristics: their age, market capitalization, general convertibility, and recent performance.
The age of the cryptocurrency reflects its ability to remain in circulation over time. The process of determining market capitalization requires multiplying the number of crypto in the market by its value in the fiat currency, most commonly the U.S. dollar. At the same time, general convertibility requires monitoring companies and jurisdictions accepting cryptocurrency as a payment method. Last but not least, recent performance analysis allows assessing whether the crypto has been in a downward spiral recently, which could lead to its demise.
Bitcoin (BTC) has been around since its launch in January 2009, meaning that it’s been here for over a decade. The market capitalization of Bitcoin reached 18.9 million at $46,802 per BTC, namely, $46,802 * 18.9 million = $884.6 billion. The largest companies, such as Tesla, accepted BTC as a form of payment while certain countries, like El Salvador, made Bitcoin a form of legal tender.
BTC has remained highly volatile recently, with its exchange rate going from $29,374 per BTC in December 2020 to $63,110 per BTC in April of 2021. The rate went down to $29,807 per BTC in July 2021 and $66,972 in November 2021. The rate declined once again in January 2022. The changes exceeding 100 percent over several months represent substantial investment risks. However, the general trend towards the increase in value makes Bitcoin a strong investment option.
Ether (ETH) holds solid second place as the largest cryptocurrency. Its release happened in July 2015 with the launch of the Ethereum open platform, a programmable blockchain allowing its use by third parties. The market cap of ETH reached $434.8 billion in 2021 at the rate of $3,629 per coin. Amazon, Overstock, Travala, and over a dozen other companies accepted ETH as a form of payment. Ether showed highly similar volatility to the BTC in 2021.
The third place amongst the largest cryptocurrencies is not as apparent as the first two. Some sources suggest Tether (USDT), while others recommend Polkadot (DOT). Each of the mentioned alternatives is definitely deserving of the third spot. For instance, USDT is a stablecoin that has the benefit of U.S. dollar backing. Polkadot can connect to various blockchains, which gives it a unique advantage. Thus, the choice between those two will be highly subjective.
Relying on the largest cryptocurrencies has its limitations from the standpoint of potential returns. Another approach would be to consider the smaller crypto with strong growth potential and relative durability.
It is possible to cite Solana (SOL), Decentraland (MANA), and Kyrrex (KRRX) amongst these potential investment targets. Similar to ETH, SOL has its own programmable blockchain. It demonstrated a stellar performance in 2021 with 13,000% growth, implying further potential for 2022. MANA is the currency of the blockchain-based metaverse Decentraland, and the prominence of the concept may propel it in 2022 and beyond. KRRX is a TRON network token offering lower trading commissions at high volumes, Social Trading, Multi-Account Management, and Online Banking features. The Kyrrex Crypto Exchange behind the token contributes to its utility and long-term growth potential.
A conservative investor would allocate between 5.0% and 10.0% of their portfolio for cryptocurrencies. Such an approach will allow them to benefit from the upside movements in the exchange rates without facing critical losses during the bearish market trends.