2021 is presented as the year of recovery, although uncertainties are still present. Therefore, many investors are looking for new investment alternatives and one of the most interesting is to invest in cryptocurrencies, which are assets that since their creation have experienced a great revaluation and, according to experts, will continue to have an upward trend. In this article we explain what a cryptocurrency is, how it works, how to invest, which cryptocurrencies to invest in and which are the best in 2021.

What are cryptocurrencies?

The most widespread definition of a virtual currency is that it is a digital, non-physical currency that uses cryptography to secure and manage transactions, as well as to create new currencies.

This explanation of what a cryptocurrency is includes the two most important characteristics of these electronic currencies. The first is that they do not have a physical medium. That is, there are no banknotes or coins as there are for euros, dollars or pounds. Cryptocurrencies are virtual and although they can be stored in physical devices (wallets such as hard disks or USB sticks) they have no physical representation.

The second is that cryptography is used to create new units, which for practical purposes means that it does not depend on any government or country. With virtual currencies there is no central agency or government in charge of creating new currencies and putting more money into the market. As an example, Bitcoin uses blockchain technology to regulate the creation of new units. Moreover, in this case, the number of available coins is limited, something that is not always repeated with other cryptocurrencies.

Types of cryptocurrencies

Dash, Ethereum, Ripple, Litecoin… there are many virtual currencies beyond the famous bitcoin. In fact, today the number of virtual currencies is well over 1,300 worldwide.

What differentiates the types of cryptocurrencies is the technology they use on the one hand and their philosophy on the other. To understand it better, most virtual currencies use blockchain technology but with certain changes that can make them faster in processing transactions, for example. In addition, there are also currencies that use totally different formulas. Added to this is the philosophical part such as putting a finite number of coins in circulation (bitcoin) or not doing so, as well as the degree of transparency in transactions.

Although when investing it is necessary to have sufficient financial knowledge and know exactly what are the products in which we are depositing our money and what risks we are assuming. In Finect we tell you which are the best cryptocurrencies to invest in and what you should take into account when choosing them.

List of cryptocurrencies

How many cryptocurrencies are there? More than 2000 and rising. Every week a new virtual currency is created in a process called ICO, which we will summarize below.

The most popular virtual currencies right now are the following:

• Bitcoin
• Litecoin
• Nxt
• Ethereum
• Bitcoincash
• Tron
• Ripple
• Dash
• Iota
• Monero
• Zcash
• Cardano
• Stellar
• Nem
• Neo

The number of existing virtual currencies is much larger and continues to grow every day. To check the legal cryptocurrencies you can consult pages with more than 800 virtual currencies and their corresponding quotation such as: World Coin Index and CoinMarketCap.

In both places you can consult a list with the most important virtual currencies and also see the quotation of these virtual currencies.

New cryptocurrencies

The world of virtual currencies never stops and almost every day new proposals emerge, known as altcoins or alternative coins in reference to the fact that they are alternatives to bitcoins. In the previous point we have already reviewed some of the most important ones and now we are going to see how to invest in new cryptocurrencies.

Just as there are company IPOs, cryptocurrencies also have their initial public offerings. These are called ICOs or Initial Coin Offerings, which will remind the stock market investor of IPOs or Initial Public Offerings, which are called IPOs in English.

ICOs are used to finance business projects and culminate in the birth of new virtual currencies. With the ICO the company puts into circulation new virtual currencies in exchange for money.

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In which cryptocurrency to invest

Earning coins with cryptocurrencies is possible, but you have to know which one to bet on and how to do it. In this sense, there are different ways to invest in cryptocurrencies, from trading cryptocurrencies to mining virtual currencies. Choosing the right asset and the way to mine is key, especially when they are so volatile and have so much risk.

Best cryptocurrencies to invest in 2021

What have been the most profitable cryptocurrencies of 2020 and so far in 2021? Which coins have achieved the best returns? The following list gathers the ones that have accumulated the most profit at one year. You can see the full list on sites like Coincodex.

Aave. Accumulated a return of +6398.22% in the last year. Kusama. Accumulated a return of +5222.37% in the last year… Celsius Netowork. Accumulated a return of +3843.88% in the last year. Band Protocol. Accumulated a return of +2850.66% in the last year. Theta Token. Accumulated a return of +2299.39% in the last year. Reserve Rights. Accumulated a yield of +2138.28% in the last year. Loopring. Accumulated a return of +1939.66% in the last year. THORChain. Accumulated a return of +1797.66% in the last year. SwissBorg. Accumulated a return of +1669.58% in the last year. Zilliga. Accumulated a return of +1454.44% in the last year.

In addition, in this complex year, the technology sector is one of the sectors that has been boosted the most. This whole situation has caused online sales to skyrocket, the use of platforms for home food delivery, to watch series and movies, etc. This has caused the big technology companies to have a strong rebound in the stock market, placing the Technology Sector Equity category among the best performers so far this year.

Most profitable cryptocurrencies

As the stock market saying goes, past performance is no guarantee of future returns. The evolution of a virtual currency is a good indication of its potential, but that does not mean that it is the best cryptocurrency to invest in 2021. The price of virtual currencies, with falls of more than 50% on many occasions is a good example. Is this an indication that we should flee the sector in a hurry? Far from it, just that the price was too inflated.

Which cryptocurrencies are performing best in 2021? This is a list of the digital currencies with the best future taking into account their potential and evolution so far.

Bitcoin

Whether we like it or not, bitcoin is still the main cryptocurrency, and the best one to invest in, the one that sets the standard of behavior for the rest of virtual currencies. There are several reasons why you can think that investing in bitcoin is a reasonable investment, and it is because it is decentralized, that is, there is no central institution that controls the supply of bitcoin.

There will be currencies that revalue more, especially ICOs, but if there is one with a future, this is the bitcoin. In this article we explain how to buy bitcoin. To know everything about this currency visit our article: Investing in Bitcoin.

Ethereum

Ehtereum is the great alternative to Bitcoin and the second virtual currency in terms of capitalization. Far from the leader yet and dismissed the possibility of it surpassing it as digital money, its strength is in the development of applications and how it uses smart contracts in development environments.

Ethereum and Ether were already one of the most profitable cryptocurrencies in years past.

An alternative to investing directly in Ethereum is to buy cryptocurrencies based on its technology such as Aragon or Stox.

Ripple

Ripple is another major coin in terms of capitalization after Bitcoin, Ethereum or Bitcoin Cash. It is a coin that has grown less than the rest in the last quarter of last year and has great potential.

Ripple is no newcomer, as it has been around for 5 years. It is technology-based and allows up to 1,000 transactions per second, much faster than Bitcoin. In addition, its technology can be used as a protocol

IOTA

IOTA is one of the most ambitious projects in the field of cryptocurrencies. Its goal is to incorporate virtual currencies into the internet of things and it does so by leaving aside the blockchain technology used by most currencies of this type. IOTA is based on Tangle technology, which in theory is much more scalable, faster and lighter than blockchain.

NEO

Known as China’s Ethereum its future is going to be tied to what the Asian giant decides about the future of cryptocurrencies. The Chinese government has already announced greater control over the sector….

Litecoin

Litecoin is one of the veterans in the sector. Created in 2011, it sought to reduce the transaction time compared to bitcoin.

Like bitcoin, Litecoin’s limit is 84 million coins, of which there are already about 55 million in circulation.

Reddcoin

Reddcoin or RDD is one of the low-cost cryptocurrencies. It defines itself as a social currency and its use is limited to social networks.

Reddcoin has its own platform for tipping on social networks that can already be used on Twitter and Reddit.

Monero

Monero is the anonymous cryptocurrency. With it the details of the coin transaction cannot be traced. That is its main strength over other options and what gives it value.

How to buy cryptocurrencies

There are mainly two ways to invest in cryptocurrencies: buying cryptocurrencies or mining them. The first option is the most common and also the most accessible.

Buying a virtual currency is not so different from investing in commodities, for example. What changes is the platform through which it is done. And it is to invest in cryptocurrencies in 2021 there are specialized websites and with their own cryptocurrency wallets, which is where the cyber currencies are stored.

Cryptocurrency wallets

There are several types of virtual currency wallets depending on their operation and security. Ordered according to security they would be the following:

Cold wallets. It is hardware or a physical device where coins are stored. It is the most secure against theft, but also the least practical when making transactions. Wallet applications. It is software that simulates a wallet and is accessed after downloading the program to your computer. Online wallets. These are the most widespread. They are accessed online through the Internet, without the need to download anything. Their main advantage is that they are very practical when making transactions. Exchange houses. They are the banks of cryptocurrencies and work in a very similar way to a broker. It is, without a doubt, the easiest way to buy and sell cryptocurrencies. Where to invest in cryptocurrencies

Which specific wallet to choose? Where can I buy cryptocurrencies? It will depend first of all on the virtual currency you want to buy, since not all of them accept all currencies. From there this is a list of the most popular sites:

List of cryptocurrency trading platforms Coinbase (online wallet) CEX.io (online wallet) Mycelium (online wallet) Xapo (cold wallet with mobile application and exchange house) Exodus (wallet application) Bitcoin Core (online wallet) Jaxx (wallet app and online wallet) Blockchain (online wallet) Electrum (online wallet and cold wallet) Trezor (cold wallet) Bread Wallet (wallet application) Bitgo (online wallet) at Bitstamp (cryptocurrency exchange) Kraken (cryptocurrency exchange) Bitfinex (cryptocurrency exchange)