This last decade has seen cryptocurrencies reach the global economy. From buying items online, to getting a dealer to give a bottle of whisky to your uncle in the middle of nowhere, to virtual collectibles, their many uses have started to catch the eye of the global population.
At the moment, just like any graph, we are seeing the wave calming down before, perhaps, a second wind. Noticing that at the peak (December 2020), crypto spiked four times more interest than in the past three years!
However, the value of this sector remains a mystery to most people, and those who are willing to invest struggle to figure out the best cryptocurrency to choose. As of January 2021, more than 4,000 cryptocurrencies exist, and they all have their own features and mechanics.
In this article I will explain what is required in a cryptocurrency for it to be considered a good investment, and highlighting some of the top cryptos that I think meet these criteria. This will help you make an educated choice regarding where to allocate your crypto investment, and get a general idea of how it is advisable to select them.
Note that with over 4,000 different cryptos available, it's impossible for me to cover all the promising projects out there in a single article. With that in mind, this article just covers a few of my favourites, but just because your favourite crypto isn't mentioned doesn't mean it's a bad project. Just keep the factors I mention in the next section in mind when evaluating your own investments.
What makes cryptocurrency a good investment?
To understand why a certain cryptocurrency is a wiser choice than another, we have to understand why it has value. Why are we paying for a line of computer code?
Just like other assets, cryptos follow the law of supply and demand. Just like a commodity, or a positional product (a watch, an expensive car, etc), the price is what people are willing to pay to acquire it for.
The main factors that impact supply and demand are:
- Scarcity: Having a countable and rare supply is a key driver of a coin’s value. As an example, imagine a poster that only has 10 copies. With only 10 copies available, the 10 people who are willing to pay the most are the ones who will end up owning them. Ultimately, you will end up paying more than if it had an infinite supply!
- Security: The crypto needs a certain safety net, or backup plan, in case it experiences a massive downtrend for an extended period of time. If we take the example of our poster again, if only 10 are available and the seller decides to burn two, that reduces the total supply to eight posters. Now, only the eight best offers will win, which means that the lowest price will be higher than it was when 10 posters were on sale.
- Utility: It must serve a purpose. With 4,000 types of coin on the market, if the one you chose does not stand out for a reason or another, it has very low odds of going in your favour.
- Community presence: The best way to get more buyers, and people interested in your product, is to have a lot of endorsement, this results in a healthier growth that is, if the community is strong enough, sometimes unstoppable.
- Cost: How much does it cost to buy, transfer, and sell the crypto? Some coins have very high fees, like Ethereum.
- Ease of use: How easy is it to buy, sell and send the coin? Do you have to understand a secondary protocol? How much work do you have to do to fully understand how it works?
Ideally, we want a token that is limited, with a safety net in case of sudden drop of value, that has a unique defining trait and a big following, and that is also easy and cheap to buy and sell. We want it to be unique, and valuable.
Here are six coins that fit these criteria, and why.
Binance coin (BNB)
Binance coin (BNB) is a crypto issued and used mainly on the cryptocurrency exchange Binance. This is a massive entity on the crypto market, and it is known to be one of the safest and most reliable companies in the sector.
The value of the coin interestingly follows the general interest in the crypto world - as the coin is issued by Binance, a massive cryptocurrency trading platform, the value of the coin is linked to the activity of the exchange. The more people invest in crypto, the bigger the Binance exchange gets, and the more valuable BNB gets.
Binance also has a burning program to increase the scarcity and, therefore, the value of the coin. Token burning is a method of permanently removing coins from circulation (just like the poster example I shared earlier). Binance has a target of burning half of the total tokens it has ever issued, and it burns them on a quarterly basis, at a quantity correlated with the volume of transactions performed on the website.
This burning program helps ensure a steady growth of value, ultimately making BNB to be a safer investment opportunity than some other cryptocurrencies.
This coin is strongly appreciated by most of the Binance users, which is a lot of people, as they believe this currency is a key driver to their platform’s profit and, therefore, lower fees. Most of them also own it, as they enjoy a reduction in fees and lower costs while trading while holding and using the crypto.
BNB is also available on most currency exchange platforms, which addresses the ‘ease of use’ criteria, as Binance is not known to have the most user-friendly interface.
Cardano (ADA)
Cardano is a proof-of-stake platform that is built around peer-reviewed research. This ensures experts around the world analyse and approve any decision taken around the cryptocurrency. This means there is naturally a large community involved in the project that is very invested in its technical aspects.
The Cardano token, ADA, is traded on many platforms. It also has a protocol named Ouroboros, that ensures nobody can attack the system unless they own 51% of the total supply.
One of ADA’s main assets it has is scalability. At the moment, big cryptos have to handle a certain number of transactions at the same time. The more people who are waiting in line, the more they have to pay to get in the line, and even more to be in front. ADA avoids this issue, letting everyone make transactions at the same time for a very low cost. This means that it can be used as a medium of exchange at a very large scale.
There is a fixed maximum supply of 45 billion coins, but not all of them have been made available for the moment, adding to the scarcity of the coin.
They unfortunately do not have a safety net in case of a downtrend like some other cryptocurrencies.
CHSB (Swiss Borg)
Speaking of protect and burn, CHSB is a token that will destroy its own supply when the price moves into a bearish zone to maintain a stable value. One benefit of this compared to a typical token burning program is that typical burns are based on a timed schedule (as seen with BNB). The problem with this is that speculators can take advantage of it - buying the token before the scheduled burn, then selling after the burn when the price goes up.
By only burning tokens when the price moves into a bearish zone, SwissBorg rewards loyal token holders by protecting the price of the token, and reducing the risk of large speculative sell offs. As there is a limited supply, the token’s price would go up if less supply is available!
In addition to that, their platform is extremely easy to use and their community is very helpful in case of need and extremely nice and friendly (I’m giving myself a pat on the back here).
One of the most convincing arguments in favour of CHSB is the fact that if you own your tokens in the SwissBorg app, you can place them in a yield wallet that gives you a yearly return of up to 6%.
Other than the massive growth, the token is built to be a long-term investment. CHSB therefore has a great surrounding and is on the road to grow even more than it has in the past months.
Polkadot (DOT)
Polkadot (DOT) serves three main purposes - governance regarding the ecosystem, staking to insure stability and security in the network, and bonding, which locks your tokens in for an even more effective way of keeping the value of the coin stable and growing.
Like ADA, Polkadot (DOT) has the benefit of being scalable.
But more than that, it is fast and is still in its beginnings, having just been launched in May 2020. Because DOT was created on newer technology, it is able to stay up to date more easily than the more traditional crypto currencies. This means that the security regarding it’s system is updated quickly when necessary.
DOT also has a big and very invested community helping the ecosystem grow, and the way it is designed ensures that the more people who join them, the more secure it gets.
It is also worth noting that the co-founder of Ethereum developed DOT, avoiding some of the mistakes he made when developing ETH.
Bitcoin (BTC) and Ethereum (ETH)
Bitcoin and Ethereum are the two founding cryptocurrencies, and the two people hear the most about. The two have a gigantic community presence, a huge market awareness, and are also very easy to buy and to sell. Bitcoin also benefits from a limited supply, and both BTC and ETH have security that is put up to the test on a daily basis.
One downside of the two most popular cryptos, though, is that they are lacking a safety net in case of a downtrend (which has happened a few times to Bitcoin already). They may also face technical issues in the future, as both of them run on systems that cannot run an enormous amount of transactions at the same time (unlike ADA). It is therefore impossible for everyone to use it at the same time to do grocery shopping, for example.
So while these cryptos are both strong investments due to their popularity and the level of market awareness, and both of them drive the performance of the crypto market as a whole, they don’t have some of the more interesting utilities of more recently issued coins.
Other top cryptos to invest in
Beyond the four tokens listed above, here are some other favourites:
- Enjin, a cryptocurrency used for video games transactions.
- PAX Gold, a cryptocurrency backed and capped to the value of Gold.
- USDC, a cryptocurrency backed and capped to the value of the US dollar.
- Nano, an instantaneous and costless cryptocurrency, used for sending/receiving.
- Digibyte, safer and faster than the traditional cryptos, with a huge internet presence.
How do you invest in these cryptos?
To invest in cryptos, you will need a wallet to store those cryptos, and/or an account with an exchange to buy them. Fortunately, SwissBorg combines the best of both worlds!
The SwissBorg app is both a crypto wallet and a meta exchange, which means that not only can you store your cryptos in the app once you’ve bought them, but you can also exchange them for other cryptos and fiat currencies without having to sign up for additional platforms.
On top of this, they also recently launched yield wallets that allow you to earn a passive income on your cryptos, starting with USDC (a stablecoin pegged to the US dollar), CHSB and ETH.
With the simplicity of use, the transparency, the yield, the community and the growth, I feel like SwissBorg is definitely a hidden gem.
The only downside might be that they don’t have as many available cryptocurrencies available as some other apps. However, they are rigorous with their selection process and only add cryptocurrencies that have strong fundamentals. From the cryptos discussed in this article, the app includes BNB, CHSB, ENJ, PAXG and USDC, and more are on their way!
For long-term investors, this wealth management app is all you need, and for short-term investors, it is for sure a great app to own as they have statistical analysis and AI predictions for the main currencies on the market, to help you decide what to do.
There is also the possibility to put ideas forward for them to be placed in the app, in case you have a little idea that you think is good to implement.
Disclaimer: This document should be considered as marketing material and not as the result of financial research/independent investments.
The information provided in this article, including but not limited to, opinions, products, data, services, tools and materials contained or described in this article does not constitute financial advice, trading advice, or any other type of advice, and should not be interpreted or understood as any form of promotion, recommendation, inducement, offer or invitation to (i) buy or sell any product, (ii) carry out transactions, or (iii) engage in any other legal transaction. They are provided for informational purposes only.
