Cryptocurrency is a digital asset that derives its value from its perceived transaction advantages and convenience compared to other currencies. For example, a significant advantage of cryptocurrency is that its operating rules and issuance do not rely on a central bank; instead, it is managed by programmed algorithms that no single entity controls. Bitcoin and most other cryptocurrencies are supported by a technology known as a blockchain — an ingenious breakthrough that maintains a tamper-resistant record of transactions and prevents individuals double-spending their digital currency.
Nonetheless, cryptocurrency is considered a high-risk investment because it’s inherently volatile, often fluctuating by large amounts within a short period of time. The extreme volatility results from prices that heavily rely on shared beliefs and market sentiment. High risk isn’t inherently bad or good for an investor. Risk works both ways, meaning that each investment into crypto carries the risk of significant failure and benefit of significant success. As an investor, you must evaluate your own risk tolerance before venturing into a cryptocurrency investment and decide between a short-term strategy, long-term strategy or a combination of both.
A short-term strategy is suited for those with high risk appetites who are willing to leverage the volatility of short-term price movements. A long-term strategy is suited for those with less tolerance for risk and strong conviction in the viability of their coins.
Best Layer 1 Blockchains
Layer 1 refers to a base network, such as Ethereum, Bitcoin or BNB Chain and its underlying infrastructure. Layer 1 blockchains can finalize and validate transactions without the help of another network. They also have their own native token, which is used to pay for transaction fees.
Bitcoin is a form of digital currency and used by most as a store of value or speculative investment. It’s decentralized, meaning that no central bank controls it. Instead, Bitcoin is run by thousands of computers distributed around the world. Despite not being legal tender in most of the world, Bitcoin is popular because it can’t be censored, has a finite supply of 21 million and allows transactions to be made at any time from anywhere.
Bitcoin is widely considered to be a flagship for other innovations in the crypto space. For this reason, all other cryptocurrencies are collectively referred to as altcoins.
Cathie Wood, the star fund manager of ARK Investment Management, predicts that Bitcoin’s price could exceed $1 million by 2030.This target is based on the assumption that Bitcoin will increase significantly during the next several years. Eight specific uses were mentioned in the report that supports this target, including:
- Institutional investors will allocate 2.55% of their portfolios to Bitcoin.
- It will represent 5% of cash held on balance sheets of S&P 500 companies.
- Bitcoin will have surpassed 50% of gold’s value.
Ethereum is a decentralized computing platform. In other words, you can think of it as a public shared global computer network. It doesn’t run on a single device, but instead runs simultaneously on thousands of devices around the world. People around the globe contribute their computer’s computing power to the network and are paid for doing so.
The main idea behind Ethereum is that developers can create and launch code that runs across a decentralized network instead of a centralized server (using smart contracts). This aspect means that these decentralized applications (dApps) cannot be censored or shut down.
Ethereum vs. Bitcoin – What’s the Difference?
Bitcoin is generally referred to as a first-generation blockchain. It wasn’t designed as an overly complex system, which is a strength in terms of security. In contrast, Ethereum is known as the first second-generation blockchain. In addition to financial transactions, second-generation blockchains allow a greater degree of programmability.
In late 2021, a panel of 50 Bitcoin, Ethereum and cryptocurrency experts, put together by personal finance comparison site Finder, returned an average Ethereum price prediction of roughly $51,000 by the end of 2030.
Disclosure: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Polkadot is a second-generation blockchain that connects several specialized blockchains into one unified network. In other words, Polkadot is designed to join the dots with other networks. By connecting different blockchains, Polkadot promotes unprecedented interoperability.
Polkadot is designed to operate two types of blockchains. The main network is referred to as a relay chain, and all transactions on there are permanent. Alternatively, there are user-created networks called parachains. These blockchains work in parallel to Polkadot and can be customized for a diverse range of uses.
At the time of writing, most blockchains operate separately and in silos, which means that talent and resources are diverted into developing on competing networks, rather than a unified system. To solve this, Polkadot aims to create an internet of interoperable blockchains for a decentralized web. This feature would allow developers to build value on top of all blockchains, rather than just one.
If Polkadot manages to outperform competing blockchains aiming to grow an ecosystem of cryptocurrencies such as Cosmos in the future, Polkadot could grow exponentially. According to TechNewsLeader, Polkadot could reach $440 by 2030.
Best Layer 2 Blockchains
Layer 2 refers to a secondary protocol that is built on top of an existing blockchain. The primary purpose of these protocols is to solve the scaling difficulties and transaction speed that are faced by major cryptocurrency networks. Two examples of Layer 2 solutions are the Bitcoin Lightning Network and Ethereum Plasma.
Polygon is designed to reduce costs and complexities and to improve the speed of transactions on Ethereum. Polygon describes itself as a Layer 2 network because it can act as an add-on layer to Ethereum that does not aim to change the original blockchain layer. Similar to a true polygon, which can have many sides, shapes and uses, Polygon promises to be a simpler framework for building interconnected networks. Polygon wants to assist Ethereum to improve security, efficiency and scalability.
If Ethereum continues to grow and thrive in the future, Polygon could be a promising Layer 2 blockchain investment. Polygon co-founder Sandeep Nailwal believes that Polygon could see 100x growth by 2030.
Rollups, zkProofs and Sidechains
Polygon assists two major types of Ethereum-compatible networks: stand-alone chains and secured chains. An example of a stand-alone chain is a sidechain, and an example of a secured chain is a rollup.
Secured chains rely on the infrastructure of the chain they are attached to, which means that they don’t have to adopt their own security model. Conversely, stand-alone chains handle their own security. Secured chains tend to offer a greater level of security, while stand-alone chains tend to be more flexible for specific needs. In the future, the Polygon platform aims to support a larger variety of scaling solutions, including optimistic rollups and zero-knowledge (zk) rollups.
Best Blockchain Tokens
For the most part, the terms token and coins are used interchangeably by most people. However, tokens and coins are slightly different. The biggest difference between a coin and a token is that tokens are built on an existing blockchain, using smart contracts, whereas coins are the native asset of a blockchain like BTC or ETH.
Chainlink is a service designed to connect blockchains with the real world. By nature, blockchains don’t have an effective way to access external data – it’s difficult to connect off-chain data with on-chain data when using smart contracts.
Chainlink aims to tackle this problem by providing a decentralized oracle service that can provide external data to smart contracts on Ethereum. Note, an oracle is a piece of software that translates external data to a language that smart contracts can understand (and vice versa). Chainlink can connect APIs, internal systems or other types of external data feeds. LINK is an ERC-20 token and is used to pay for the oracle service on the network.
Decentraland (MANA) is a virtual reality platform powered by the Ethereum blockchain. Users can experience, create and monetize content and applications on the platform. A key feature of the platform is the ability to purchase land in its virtual world and build on it. Decentraland is distributed in a decentralized, peer-to-peer network. Decentraland can work without a centralized server, meaning the world can continue to exist as long as it has users on its platform. Decentraland claims to be the first fully decentralized virtual world.
If metaverses like Decentraland continue to gain adoption, the token will likely appreciate alongside this growth. As more people live their lives online, corporate offices, casinos and shopping districts are becoming important features of Decentraland.
Where to Buy Cryptocurrencies
SAND, LINK, MATIC, ETH, BTC and DOT can be traded on major exchanges such as Coinbase Global Inc. (NASDAQ: COIN), Gemini, Crypto.com, KuCoin and Kraken.
Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.
Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.
- New cryptocurrency traders
- Cryptocurrency traders interested in major pairs
- Cryptocurrency traders interested in a simple platform
- Simple platform is easy to operate
- Comprehensive mobile app mirrors desktop functionality
- Coinbase Earn feature rewards you with crypto for learning about available coins
- Higher fees than competitors
Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.
Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader.
In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.
- New investors looking for a simple mobile and web app
- Day traders looking to use technical analysis tools
- Users looking for a 1-stop-shop to buy, sell and store all of their cryptos
- Easy and quick signups — can get started in as little as a 5 minutes
- Multitude of platforms to accommodate traders of all skill levels
- Hot wallets include insurance to protect your from theft and hacking attempts
- Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
How to Store Cryptocurrencies Safely
Cryptocurrencies can be stored using a hardware wallet or a software wallet. A hardware wallet is widely regarded as the most secure way to store crypto. It keeps your private keys offline so that your crypto is inaccessible to anyone but the holder of the private keys. Ledger wallet is a great choice for a hardware wallet –– Ledger claims to provide the highest level of security for crypto assets.
Software wallets enable crypto holders to securely store their digital currencies and tokens in one place. These types of wallets allow users to buy, swap, lend and earn cryptocurrency in an efficient manner. The Coinbase Wallet is an example of a software wallet.
Cryptocurrency Price Movements
Currently, Bitcoin has been on an uptrend, but it’s still trading below its previous all-time highs. However, many analysts warn about a potential correction from heavy resistance at higher prices. If a correction occurs, the entire cryptocurrency market could continue to fluctuate within this short-term sideways channel that the market has been consolidating in for a while.
Cryptocurrency Price Predictions 2030
Overall, the cryptocurrency space offers a lot of growth potential, particularly for the promising coins mentioned above. The number of cryptocurrency investors around the world has steadily increased, with recent growth being explosive.
Whether they want to buy into it or not, businesses, investors and brands can’t ignore the rising tide of crypto. Conservative analysts estimate that the global cryptocurrency market will more than triple by 2030, hitting a valuation of nearly $5 billion. However, again, it is important to note that cryptocurrency is a risky investment. Despite the growth potential, many investors are worried about the impacts that future regulations will bring about. Whatever future crypto holds, there’s a lot of development needed to balance the risk with the rewards. Brands and individuals must continue to innovate to make the market feel safer and more stable.