Bitcoin, with its first-mover advantage and robust security, is the best cryptocurrency to invest in today.
There are other cryptocurrencies worth putting some money into – and we'll look at some of those in a moment.
But Bitcoin (BTC) has emerged as the blue chip of the bunch.
In a nutshell, here's why Bitcoin remains the best cryptocurrency to invest in despite all the competition:
- First-mover advantage: Bitcoin is the granddaddy of digital currencies. It gained traction – and notoriety – before most other cryptocurrencies were created. The relatively large user base means Bitcoin benefits from a "network effect." As more people use Bitcoin, its utility increases, which in turn attracts more new users.
- Biggest market cap: The total value of all bitcoins is about $41 billion, more than twice that of second-place Ethereum. It's a reflection of the lofty Bitcoin price, which is about $2,500 now, although it hit $3,000 in June. A large market cap makes it easier for wealthier players to invest, adding to demand that helps push prices higher.
- Capped supply: The code that runs the Bitcoin network specifies that only 21 million bitcoins will ever be created and that the rate of creation declines over time. Nearly 16.5 million bitcoins already have been mined. The tight supply, combined with steadily rising demand, is bound to drive prices up. Most other cryptocurrencies aren't nearly so restrictive in regard to supply.
- Most secure network: The more computing power the network has, the more difficult it is for a hacker to break into it. Lured by the Bitcoin reward – currently 12.5 bitcoins for each block mined – and rising transaction fees, Bitcoin miners have thrown increasing amounts of computing power into the network. That fact, and that it uses the SHA-256 cryptographic protocol designed by the National Security Agency, make Bitcoin virtually unbreakable.
And despite the big gains Bitcoin has enjoyed – more than 180% just in 2017 – it's not too late to invest. The price of Bitcoin is likely to double by the end of the year. And over the next decade or so, the Bitcoin price could reach $100,000 or even $1 million.
But what about Ethereum? The No. 2 cryptocurrency is also a very good bet…
Why Ethereum Is a Good Cryptocurrency to Invest in
Having launched in 2015, Ethereum (ETH) is not only younger than Bitcoin, it's younger than hundreds of other cryptocurrencies.
And yet it quickly surged to the No. 2 spot, giving you some idea of how much potential Ethereum has.
That potential is reflected in the huge gains in the Ethereum price. Even with its recent pullback to just under $200, the price of Ethereum is up 2,300% this year alone.
Some mistakenly believe Ethereum is in a rivalry with Bitcoin, but their differences make them complimentary.
These are also the traits that make Ethereum the next-best cryptocurrency to invest in:
- It's a computer: The Ethereum network can actually run programs on a global scale. These programs are called Dapps (distributed applications). It is this ability that has attracted a lot of attention from major investors as well as many of the world's top tech and financial companies.
- The Enterprise Ethereum Alliance: This consortium of more than 150 companies includes such powerhouses as JPMorgan Chase & Co. (NYSE: JPM) and Microsoft Corp. (Nasdaq: MSFT). The EEA's goal is to harness the Ethereum network's programmability to create "enterprise-grade software." Only launched in February, the EEA has the potential to push the price of Ethereum much higher.
- Foundation of ICOs: Most of the initial coin offerings that have launched over the past year, which can raise millions of dollars in a matter of minutes, have been based on Ethereum. With the ICO trend accelerating, this will be another powerful catalyst for the Ethereum price.
These are the primary reasons why Ethereum price predictions for the end of 2017 go as high as $500.
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Still, some investors want to venture beyond Bitcoin and Ethereum into the wider world of cryptocurrencies…
Investing in Cryptocurrencies: Fantasy vs. Reality
Of the more than 1,000 cryptocurrencies that have been launched, all but 26 trade for under $5.
It's easy for investors to believe a cryptocurrency they pick up for $0.50 each will go to $100 or $1,000 and make them rich, even starting with modest sums of a few hundred dollars.
While not impossible, such an outcome is not likely. Apart from Bitcoin and Ethereum, only a handful of the hundreds of cryptocurrencies out there will enjoy substantial gains.
Think of cryptocurrencies today in terms of the dot-com boom of the late 1990s. Many of the overhyped Internet-based companies of the day went belly up in the dot-com bust of 2000-2001, taking billions of investor dollars with them.
The challenge is to figure out their latter-day equivalents among the cryptocurrencies.
For those willing and able to bear the risk, we've put together this list of the 10 best cryptocurrencies to invest in outside of Bitcoin and Ethereum…