Bitcoin (CCC:BTC) is certainly the best-known cryptocurrency and the largest by market cap, but that doesn’t necessarily make it the best choice.
The cryptocurrency market has become an exciting topic among many investors. Starting around 2017, cryptocurrency returns made the headlines in many countries as participants wondered which would be the best cryptocurrency to own in the long run.
Nowadays, many investors are nervous about broader equity markets’ future over the next several years. Central banks are using various tools to provide liquidity in the markets.
We hear about national debt levels piling up and interest levels going down to record low levels. Therefore a large number of investors are looking at cryptocurrencies and wondering if a similar overzealousness may once again manifest in 2020 or beyond?
If you also believe that these payment platforms may have a potential run-up in price in the near future, then you may want to do further research on which cryptocurrency should be on your radar screen. A basic internet search will list thousands of cryptocurrencies.
Let’s take a closer look.
Is Bitcoin the Best Cryptocurrency to Own?
As Bitcoin remains the poster-child for the industry, many investors still feel it is possibly the best cryptocurrency to own.
Each investor would need in-depth research to decide what may be best for their portfolio. However, today I’d like to discuss how the BTC price moves in more detail. Bitcoin was invented in 2009 by an anonymous founder (or group of founders) using the pseudonym Satoshi Nakamoto.
In the 2010’s consumers increasingly began to appreciate that cryptocurrencies could enable users to exchange virtual payments for goods and services. The fact that they do not require a central trusted authority (such as a government) has contributed to the allure.
Every time I look at a Bitcoin price chart, I immediately notice continuous peaks and troughs as well as choppiness. In other words, soon after it looks like it’s ready to make new highs, the price plummets.
For example, in 2017, the price soared from under $1,000 to nearly $20,000. But it then fell below $7,000. By November 2018, it was below $4,000. Then in June 2019, Bitcoin was over $10,000.
Yet in early January 2020, Bitcoin was back around $7,000. As broader stock markets began falling in February, Bitcoin hovered around $9,000. By mid-March, it dropped to the $5,000 level.
As global stock indices and individual share prices began recovering from their multi-year lows seen at the end of March, the Bitcoin price also began an ascent. On 8 May, it was shy of $10,000. Then the next few days proved extremely volatile as the cryptocurrency went through its third “halving” on May 11. On that day, the price went briefly below $8,300.
InvestorPlace‘s has recently written in detail about Bitcoin’s halving. He highlights that “Very roughly, halving correlates to a reverse stock split or share buybacks.”
On 18 May, as I write, the price is hovering around $9,600.
Any other cryptocurrencies?
However, there are several alternatives to bitcoin that many investors watch. For example, you may want to do due diligence on Ether and Ripple, two of the large market cap cryptocurrencies. However, please note that due to the volatility of this market, their capitalizations change frequently and often by large amounts. And each currency has a slightly different make-up.
Ether (CCC:ETH), is the cryptocurrency of the Ethereum network, which was launched in 2015 as a programmable blockchain.
Ethereum’s website highlights that, “Like other blockchains, Ethereum has a native cryptocurrency called Ether (ETH). ETH is digital money. If you’ve heard of Bitcoin, ETH has many of the same features. It is purely digital, and can be sent to anyone anywhere in the world instantly. The supply of ETH isn’t controlled by any government or company – it is decentralized, and it is scarce.”
From humble beginnings in early 2016 around $2.5, the ETH price almost hit $1,100 in Jan. 2018. Now, it is hovering at around $210.
Ripple (CCC:XRP) was also one of the best-performing cryptocurrencies of 2017. It still has one of the highest market caps. Its website describes XRP as, “a digital asset built for payments. It is the native digital asset on the XRP Ledger—an open-source, permissionless and decentralized blockchain technology that can settle transactions in 3-5 seconds.”
XRP’s best days were also in 2017 and early Jan. 2018, when it reached an all-time high of $2.7751. Now, it is hovering at around $0.1997.
Amid such wild price swings, the debate over the value and the future of many cryptocurrencies rumbles on. Yet everyone agrees on how volatile the industry is. And that choppiness may make these cryptocurrencies a day trader’s dream and a long-term investor’s nightmare.
Investing the hard-earned cash (that you may want to grow for retirement years) in the highly volatile cryptocurrency market may not necessarily be for everyone, but you may still want to keep abreast of the developments in the industry as well as in the technology behind cryptocurrencies.
Blockchain Is Here to Stay
There may be a way to have the best of both worlds through both owning a cryptocurrency and potentially buying blockchain-relevant shares. Cryptocurrencies are based on blockchain technology, which can be described as a digital ledger, acting like a spreadsheet.
In the future, blockchain applications are likely to have an increased impact on agriculture, asset management, insurance, healthcare, retail, and supply chain management, to name a few areas.
Therefore for retail investors, companies that work with blockchain technology may also be appropriate businesses to do due diligence on. Their shares may potentially be worthy additions to long-term portfolios.
For example, the Energy Web Foundation is working with energy giants, including BP (NYSE:BP) and Royal Dutch Shell (NYSE:RDS.A), to explore how blockchain technology can be used in the energy sector.
Several big pharma and biotechnology companies, such as AbbVie (NYSE:ABBV), Pfizer (NYSE:PFE) and GlaxoSmithKline (NYSE:GSK), have been collaborating to promote and cut the cost of drug discovery through increased use of blockchains.
Some global banks and financial institutions, including JPMorgan Chase (NYSE:JPM), HSBC Holdings (NYSE:HSBC) and Visa (NYSE:V), are researching the potential use of blockchain-based banking solutions.
Grocery stores and food manufacturers, such as Walmart (NYSE:WMT) and Unilever (NYSE:UN), are exploring how blockchain could help them keep track of food in the supply chain.
Put another way, I expect to hear the word ‘blockchain’ more often in the near future. And Many public and private companies will likely to embrace this new technology.
The Bottom Line on Cryptocurrency Industry
The cryptocurrency market has evolved at an unprecedented speed since Bitcoin came into existence in 2009. Until then, gold was the only real option when it came to fiat-currency alternatives. Gold is not printed by any central bank. It also has intrinsic value. Blockchain technology behind cryptocurrencies has added a new dimension to non-fiat currencies.
Cryptocurrency went mainstream in 2017 as the price of bitcoin, the most popular cryptocurrency skyrocketed. Since then many see BTC as the best cryptocurrency to own.
Billionaire investor Paul Tudor Jones regards bitcoin as a top bet for a hedge against post-pandemic inflation. If you agree with him as well as other analysts that the post-coronavirus world may be good for the price of cryptocurrencies, then you may want to include Bitcoin or a basket of cryptocurrencies in your portfolio, too.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.
