What Is The Next Cryptocurrency To Explode: 5 Currencies To Keep An Eye On
Understanding the hottest trends in cryptocurrency and how to invest wisely can help you build a strong portfolio that will withstand the market's volatility. Unlike traditional investment instruments or stock markets, the crypto market can pivot on a dime based on the manipulation of one influential character; flash crashes can wipe out 50% of your portfolio assets overnight, or entire projects can evaporate once their scam or poor business acumen comes to light.
This article does not contain investment advice, nor should you listen to solely one person or source to determine your investment strategy. Instead, to invest in cryptocurrencies properly, you must educate yourself on the nuances of industry and developer operations.
Bear in mind that the strongest investment play in crypto, in most instances, is to buy the dip and hold the coin safely for a long period so it can grow in value. As of June 2021, Bitcoin increased in value by approximately 271% in the past 12 months and approximately 5,292.96% over its entire existence.
What a Coin Represents
A coin is similar to a stock that anyone can buy through an exchange or centralized platform. Just like a stock investment, you should know something about the project the coin represents. Visit the project website, explore any media associated with the project, read their whitepaper, and explore their community accounts, such as Telegram or Discord.
Unlike traditional companies, cryptocurrencies have direct channels to their community, and often the community itself contributes to the development of the project. The stronger and more engaged the team is with the community, the stronger the project and the deeper the likelihood that the coin will be profitable.
Cryptocurrency companies also do not use traditional social media marketing platforms, such as Facebook or Linkedin, although some may have a small presence on those platforms. Instead, most social media engagement happens publicly on Twitter and in a more private setting on Telegram and Discord.
Above all else, does the coin you're looking to invest in solve a real-world problem in its industry? Does their whitepaper show a clear path towards bringing that solution to life? Does the team have expertise in their niche, and does their board of advisors show strength and success in past projects? Bear in mind, not all successful projects will have a board of advisors or a large team, but these are usually indicators of potential success.
Understanding Market Capitalization
Next, you'll want to understand the market cap of the coin. Market capitalization extends beyond the scope of this article. Still, understanding if a coin has a small, medium, or large market cap will help you determine how to invest in the project.
Small caps usually are newer projects or projects that have not hit a certain scale of usability or viability yet. As a result, they are historically very risky. That said, if you understand how to read candle charts and properly assess a project, small caps can provide immense rewards when bought and sold at the proper time.
Medium caps are a little more solid and stable than small caps and are a good addition to your portfolio. Usually, a medium-cap project has shown viability and promise, has forward momentum, and is gaining value. While not as volatile as small caps, a solid medium cap can take a strong run and put sizeable profits into your portfolio if you time your investment properly.
Large caps are just that-- large! Large caps have usually been in existence for several years, have proven validation in the marketplace, a viable or even working product, and are usually considered a safer investment. While not as volatile as small or medium caps, a large-cap can have profitable runs and spikes in value, so purchasing at the right time can also be a strong investment move.
We would be remiss if we did not mention memecoins in this conversation. Memecoins are trendy at the time of this writing, middle of Q2 2021, and we do not recommend them as legitimate investments. Memecoins do not represent a company or project; they are simply a meme. That said, many people have made millions of dollars on memecoins recently, and many have lost millions equally as fast.
Dogecoin is the most popular meme coin and was created in 2007 as a joke. Dogecoin has an infinite supply of coins, making its value highly risky; it does nothing and contributes nothing to the blockchain community and received recent fame because Elon Musk decided to pump the coin to his large audience.
A plethora of scams exist in the cryptocurrency space, and while a memecoin isn't technically a scam, it is very close to being an outright scam. Memecoins have recently made their way into the large-cap categorization, so understanding exactly what you're investing in is paramount for protecting your investments.
Five Coins to Watch
Rune ($RUNE)
Rune is a coin that represents the THORCHain which is an independent blockchain. THORCHain is a decentralized liquidity protocol that allows users to easily exchange cryptocurrency assets across a range of networks without losing full custody of their assets in the process.
As of May 2021, the project has $144 million to work with, sufficient to implement its roadmap. The Protocol Reserves total 191,446,911.00 RUNE, worth $1.9bn, and $60 million of the total project treasury is in USD, meaning they have the funds to implement their plans. https://medium.com/thorchain/monthly-treasury-report-may-2021-5f735e590378 Projects with strong community participation are normally transparent about their finances. Be wary of any projects that do not publish their finances as they may not have the funds to implement their roadmaps.
RUNE can be purchased on multiple exchanges, including Binance, HTX, Gate.Io, and more.
Polkadot ($DOT)
Polkadot is an open-source sharding multichain protocol that facilitates the cross-chain transfer of any data or asset types, not just tokens, thereby making a wide range of blockchains interoperable with each other. Polkadot has the technical ability to process many transactions on its multiple chains, called parachains) which makes it highly scalable.
The type of technology behind $DOT is what many consider the next evolution of the internet, Web 3.0. Polkadot also has a solid user-driven governance system, so the community supporting the project plays a strong role in the future path of Polkadot.
Cardano ($ADA)
Cardano is a large market cap project that launched in 2007 and had some major developments in 2021. The Cardano blockchain is powered by Proof of Stake, which is a fast and more environmentally friendly way to confirm transactions. The project is open-source and crafted so that people who own $ADA can determine the project's direction based on voting.
Cardano saw a huge spike in valuation over the past 12 months, increasing 1,847.11% as of June 2021. The project also opened its chain to outside developers in early 2021, so anyone can build applications to run on the Cardano chain. $ADA can be purchased on most major exchanges, including Coinbase Pro, Binance, and Kraken.
Aave ($AAVE)
Aave is a decentralized finance protocol, also known as Defi, and empowers users to lend and borrow cryptocurrencies through their platform. People staking their coins for lending earn interest by depositing their coins into the platform. People looking to borrow money use their coins deposited into the platform as collateral and may borrow against their assets.
As of June 2021, AAVE is ranked #28 in market cap and is listed on most major exchanges, including Coinbase Pro, Binance, and FTX.
Any solid project in the Defi space has immense potential. Having several coins representing a Defi project, like Uniswap ($UNI) or Compound ($COMP), is a strong approach for a diversified portfolio.
Polygon ($MATIC)
Polygon is one of the first solid and easy-to-use platforms for Ethereum scaling and infrastructure development. Essentially, Polygon is a self-proclaimed Layer 2 for Ethereum blockchain and is working towards reducing scaling difficulties and making instant transactions on the blockchain. The recent popularity of Non-Fungible Tokens (NFT) has shown how expensive a congested Ethereum blockchain is to both developers and traders.
Polygon is ranked #15 for market cap in CoinMarketCap as of June 2021. Any project looking to solve the very complex and expensive problems of congested, particularly when it comes to the NFT ecosystem, is a project worth placing in your portfolio and keeping a close eye on as they develop.
Knowledge and Time are Your Friends
Understanding the many nuances of cryptocurrency trading takes time and a devotion to learning how this market and the underlying community function. While the many similarities to traditional stock markets are apparent, the differences can impact coin valuation tremendously and rapidly. If you plan on trading shorter time frames, joining an active crypto trading group or community that adheres to your trading style is a tremendous resource for creating a viable crypto investment portfolio.
Sources:
Top Crypto Trends for 2021 Every Trader Should Know | FinanceMagnates.com