Which Cryptocurrency to Invest In 2021? Crypto Investment Guide: How to Invest in Cryptos?
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We also show you which broker is the cheapest to invest in Bitcoin and other cryptocurrencies.
So you too can learn how to invest in cryptocurrencies easily!
Infobox: Investeringen in cryptocurrencies
- In 2020, the price of Bitcoin more than quadrupled (+359%). If you had invested €1,000 in January, it would have been worth €4,590 in December.
- However, besides the top dog Bitcoin, there are other cryptocurrencies (often referred to as "altcoins"") that would have earned you even more.
- Binance Coin (BNB) has gained approx. 277% in 2020
- Tezos (XTZ) has seen growth of about 190%
- Chainlink (LINK) about 459% - so the €1,000 from our example would have become €5,590.
- Developments for 2020 are also good, interesting currencies are DASH (+58.4%), ZEC (+27.94%) and still Chainlink (+25.67%) (as of Oct. 2021).
- To invest, you need a broker or an exchange, as well as a wallet if necessary.
- eToro: is the best and most beginner-friendly broker with a solid selection of altcoins.
- Capital.com: offers the largest selection of altcoins and has very low fees.
- Plus500: is a broker aimed at advanced traders, where you can trade leveraged coins.
- A wallet that is significantly more secure is offered by eToro, for example. We show more wallet options here.
After this brief overview, we will now go into more detail on investment strategies, alt-coins and the investment process.
The attention for the topic reached its peak when the bitcoin price shot up to unexpected heights at the turn of the year from 2017 to 2018. The topic dominated the headlines on a daily basis. However, since the prices of cryptocurrencies on the stock exchanges have plummeted, many investors have been unsettled.
For example, is a Bitcoin investment still worthwhile? Or is the technology itself dying? Which investment strategy still makes sense at the moment? And how big is the risk really?
Invest in cryptocurrencies: The best cryptocurrency brokers and exchanges
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Pros & Cons Crypto Investment
The Bitcoin bubble was a textbook bubble. Within a very short time, the price shot up to astronomical heights. In the aftermath, the excitement was great. With every headline about the great financial miracle, investors flocked to the market in new droves.
Then the wind shifted and prices began to tumble. Many held on to their investments out of hope that the next upswing would soon follow. Scepticism, fear and finally disgust followed.
More and more investors sold their investments. Those who had been lured by the hype suffered heavy losses. As briefly as some had decided to invest, they now withdrew from the investments in defeat.
In the meantime, the Bitcoin price is still well above the price before the hype. There is still a lot of room to go down. Will it soon go up again? Or has the downward slide not yet reached its end? That's the question investors must ask themselves who hope for great things from a long-term investment in cryptocurrencies.
Here are all the pros & cons of investing in cryptocurrencies:
Pros
Cons
How can I invest in cryptocurrencies 2021? Investing money in cryptocurrencies Instructions:
Those who have decided to invest in cryptocurrencies have various options available to them. Basically, investors who invest in the existing largest cryptocurrencies can only profit through their price increase. Dividends and interest do not exist for these currencies.
The first question that arises in this context is the investment strategy: How to invest in cryptocurrencies? And with how much capital should you invest? Basically, you can invest in crypto for the short term as well as for the long term; both have advantages and disadvantages.
First step: Registering with a broker or crypto exchange
First, you register with your broker or crypto exchange of choice. To buy cryptocurrencies, we use the broker eToro, as it offers the advantage that you can buy both real cryptocurrencies and CFDs - in other words, it combines the advantages of a broker and an exchange.
First, we click the link to register with eToro:
In the form we enter username, email and password and accept the T&Cs:
We then receive a verification email in which we click on the link to confirm the account.
Second step: top up our account
In the next step, we need to fund our account with money in order to be able to buy cryptocurrencies. To do this, we click on the "Deposit money" button at eToro:
Then we click on the "Send" button to deposit the amount.
Other payment methods at our test winner eToro:
In our example we show the purchase with credit card. eToro also offers other deposit options:
Payment method | Possible |
|---|---|
Buy Bitcoin with bank transfer | ok |
Buy Bitcoin with a credit card | ok |
Buy Bitcoin with Neteller | ok |
Buy Bitcoin with Skrill | ok |
Buy Bitcoin with PayPal | ok |
Buy Bitcoin with online banking | ok |
Buy Bitcoin with Rapid Transfer | ok |
Buy Bitcoin with Sofort | ok |
Buy Bitcoin with a debit card | ok |
Third step: Buy cryptocurrencies
- Buy or sell: In our case, we have to set to "Buy".
- Trade or order: Here we can choose whether we want to execute the trade immediately (trade) or delayed (order).
- Amount: How much Bitcoin we want to buy.
- Stop Loss and Take Profit: At which loss or profit our position should be sold automatically.
- Leverage: With which leverage we want to buy Bitcoin. With leverage X1 we buy real Bitcoin, with leverage X2 we buy leveraged Bitcoin CFDs.
Types of cryptocurrency investments:
After the purchase, you should store your Bitcoin Cash safely as soon as possible. In the next step, you can think about whether you want to resell the coins one day and at what price. After all, you want to make as big a profit as possible. And so that the coins remain in your possession in the meantime, you need a wallet.
1. cryptocurrencies direct investing
Investing in cryptocurrencies directlyWhoever wants to invest in cryptocurrencies directly must first look around for the right provider: Which crypto exchange even offers the coin I want to invest in?
Depending on which exchange you are dealing with, there are more or less steps involved: For some investments, a crypto wallet is mandatory. Others can be conveniently held on the exchange - but this always involves a risk of loss.
In addition, many exchanges - but not all - require a rather complex verification process. This all varies with your personal preferences and the asset you plan to invest in.
Offers you concrete instructions for many cryptocurrencies, which will help you to get your first own coins, often within just a few minutes.
If you want to invest in crypto now, visit our overview to find the right guide for you: Buy cryptocurrencies directly.
2. trade cryptocurrencies
An alternative to investing in cryptocurrencies is trading derivatives on cryptocurrencies. The so-called CFD derivatives are an extremely popular product in this segment.
Our crypto broker test winner eToro, for example, offers such cryptocurrency derivatives. With CFDs you can bet on the performance of cryptocurrencies. Here, this is possible with leverage. The broker also offers CFDs on shares, commodities and forex trading.
By means of CFDs, investors can achieve returns from both rising and falling prices. The correct prediction of the price behaviour of cryptocurrencies in general is rewarded here. In addition, with CFDs, investors can invest in cryptos without needing a wallet for the respective cryptocurrency.
The large crypto broker comparison 2021 helps with the selection of the best provider.
Our recommendation: Buy cryptos with eToro
- Incl. wallet
- Buy and sell cryptocurrencies directly in the wallet
- Paypal, credit card and instant bank transfer
- Regulated provider
- Real cryptos or CFD trades
3. invest crypto shares
Blockchain investments via futures, EFTs, certificates and trusts have not been possible for a long time. These financial instruments are listed on various exchanges.
For investors, this has the advantage that these forms of investment are clearly regulated and the investment risk is accordingly lower than if they invest directly in a cryptocurrency on an unregulated crypto exchange, for example.
Click here for the Bitcoin stock tips of the crypto scene editorial team.
4. mining
Mining is a method that many cryptocurrencies use to generate new units of their currencies. In the process, new blocks are created in the blockchain.
Depending on the mining method, anyone with the necessary hardware can participate in these processes. In the proof-of-work process, for example, miners are rewarded for their efforts via the transaction fees.
Miners are essential for the survival of cryptocurrencies. Only through mining can new blocks be found. These are needed to confirm transactions and prevent the double-spending problem.
When mining is no longer profitable
If mining is no longer profitable for the miners because there are too few transactions in the network and the high electricity costs exceed the income, a blockchain threatens to come to a standstill.
When this happens, new transactions can no longer be confirmed.
In mining, algorithms are decrypted. The difficulty of decryption is varied depending on the network performance. Thanks to mining, it is virtually impossible for a blockchain to be manipulated.
In the next section, you will learn which cryptocurrencies we think it makes sense to invest in in 2021.
Which cryptocurrencies to invest in 2021? Which cryptocurrency is worthwhile? What is the best cryptocurrency?
Even if it is unclear which of the cryptocurrencies will still play a role in ten years' time - and it is also conceivable that completely new, as yet unestablished companies will find solutions that will determine the crypto market of the future and overtake everything that has gone before: The Coinmarketcap index offers a good orientation point from which you can see how existing currencies are doing.
Coinmarketcap lists all relevant cryptocurrencies and sorts them according to their market capitalisation. For years, the list has of course been headed by Bitcoin, which is still by far the most popular and strongest of all cryptocurrencies.
Bitcoin has become a kind of leading index for the crypto market. When its price falls, the other cryptocurrencies usually fall with it. If, on the other hand, it rises, the competitors also write green figures.
The most exciting cryptocurrencies in 2021: Which cryptos are worth investing in?
Investing in Bitcoin
Bitcoin was the first major milestone among cryptocurrencies, and it was only after it became known that today's market developed. Bitcoin is abbreviated as BTC. Bitcoin is not only tradable in its entirety, it is also possible to buy a fraction.
For some time now, the market capitalisation of Bitcoin has stood at just over 60 billion euros. According to Coinmarketcap, the market capitalisation of Ethereum today is only around 12 billion euros.
Bitcoin's immense market capitalisation promises that it is likely to remain a relevant cryptocurrency for years to come. An investment in Bitcoin is therefore relatively safe.
The Bitcoin price is considered highly volatile, large jumps up and down are possible at any time and difficult to predict. Investments in Bitcoin are now possible with many common financial instruments.
You can find an overview of the investment options with BTC in our Bitcoin buying guide.
Invest in Ethereum
The second largest cryptocurrency on the market is Ethereum, the cryptocurrency invented by crypto wunderkind Vitalik Buterin. Ethereum has established itself primarily as a platform on which other cryptocurrencies can be built without first having to create their own infrastructure at great expense.
The so-called ERC20 tokens are the most widespread investment options on the market. In addition, Ethereum introduced the so-called smart contracts, with which certain processes can be individually specified and fully automated.
Find out how to buy Ethereum in our guide. You can find more information about the history and functioning of Ethereum on the Ether price & chart page. And here is the Ethereum Paypal Guide.
An investment in the cryptocurrency Ethereum can also be considered a comparatively safe investment - always in relation to the general risk when investing in cryptos.
Invest in IOTA
Although IOTA is only the 14th largest cryptocurrency in the world by market capitalisation, according to Coinmarketcap, it cannot be missing from our list. Soon enough - according to predictions - useful small devices will be able to be regulated via equally useful decentralised applications.
It already exists on a small scale: the radiator is automatically activated or switched off again, the light goes on when you enter the kitchen: All this is controlled via smartphone or tablet.
This is where an investment in IOTA comes into play, because microtransactions will most likely play a major role in the IoT one day. Then, for example, the car will automatically pay for the parking space it is parked in. IOTA could be the network that provides the technology that would be used for this.
insider tip among cryptocurrencies. You can find out everything about the exciting project in the IOTA price analysis.
If you want to buy IOTA, you can find help in our IOTA buying guide or in our IOTA Paypal Guide.
Invest in Ripple
In third place in the ranking of the largest cryptocurrencies according to Coinmarketcap is Ripple. Ripple has been around since 2012 and the payment network specialises in international money transfers. Thanks to Ripple, these are supposed to be faster and cheaper than the usual way. Ripple has a large number of important partnerships.
Because Ripple primarily targets the needs of financial institutions, it is often harshly criticised by idealists in the scene. But this is precisely what makes the coin an exciting investment object.
Ripple investors have nevertheless enjoyed rich profits in recent years - provided they were already on board before the crypto hype.
Crypto investing is offered by eToro (Europe) Ltd. and custody is provided by eToro GmbH. Your capital is at risk.
Ripple records a market capitalisation of around €11 billion. Recently, there have been accusations against the company that its actual market capitalisation is only about half that. Despite this, Ripple remains very popular with investors.
We describe how you can invest in Ripple in our XRP buying guide. You can find more information about the coin on our Ripple price overview.
Invest in Litecoin
The fourth largest cryptocurrency on the market is called Litecoin. Litecoin is very similar to Bitcoin: both cryptocurrencies are based on the same code. However, Litecoin is considered to be more innovative. New technologies are implemented more quickly here. Examples of this are SegWit or the Lightning Network.
Just like Bitcoin, Litecoin primarily aims to establish itself as a globally available digital means of payment. Litecoin's market capitalisation today stands at around 3 billion euros. This corresponds to one twentieth of Bitcoin's market capitalisation.
Crypto investing is offered by eToro (Europe) Ltd. and custody is provided by eToro GmbH. Your capital is at risk.
Nevertheless, an investment in Litecoin can also be considered a relatively safe crypto investment thanks to its good ranking and its comparatively still large market capitalisation. You can find more information about the history and the functioning of Litecoin behind our link.
If you want to buy Litecoin, we recommend our Litecoin Buying Guide, which will help you get your first LTC in just a few minutes.
Invest in cryptocurrency: Tips & Tricks
Our most important piece of advice is something every investor should really consider: Only invest what you are willing to lose. It makes sense to say goodbye to your investment internally. This way you are able to make neutral and tactical decisions on the market.
The risk of investing in cryptocurrencies is high - no matter what form of investment you choose. Investors should not assume that they will definitely make big profits with their investments.
Caution Tax
From the perspective of the authority, blockchain technologies are units of account. According to §1 para. 11 KWG, units of account are financial instruments. Therefore, the usual income tax or personal tax does not apply to any profit realisation.
If you instead hold your direct crypto investment for one year, a particularly attractive regulation applies: you can then realise your profits tax-free.
The situation is different for investments in CFDs, futures, certificates, ETNs or trusts. Gains from these forms of investment are taxed at 25 per cent withholding tax. An exception to this is the annual tax-free allowance. It currently amounts to 801 euros or 1,602 euros for married couples assessed jointly.
Outsiders hold great profit potential
If a large number of people are already convinced by a cryptocurrency, it appears more frequently in the news and can develop further - but the possible profit margins for late entrants become smaller.
Investing in cryptocurrencies 2021 - future and forecasts:
In the following sections, we will go through the most frequently asked questions about crypto investments with you. How to invest in cryptocurrencies? Which cryptocurrencies to invest in 2021? And: investing in crypto for the long term or rather for the short term?
You can also find an overview of the most important cryptocurrencies here. And in our buying guides for cryptocurrencies you will find answers to the very practical questions: Which exchange is the right one for my investment? And how do I get my coins?
Is it too late for a crypto investment?
In view of price drops of up to 95 per cent even in the upper echelons of cryptocurrencies, the mood on the market is subdued. A good 75 percent of the more than 2,100 currencies in existence according to Coinmarketcap are already considered dead.
Questionable companies damage the market
We are also familiar with this from the crypto market: several companies that collected millions of investors' money under flimsy promises, and only shortly afterwards said goodbye to inactivity.
But it is interesting to look at what happened after the dotcom bubble burst. A few companies survived the long winter that followed the price collapse. These have developed so strongly in price to date that they have clearly left the speculative peak of 2000 behind them.
Something similar can be expected for the crypto sphere: A handful of companies will survive in the long term. Anyone who could predict which companies these would be would be certain of investor happiness in the future.
The enormous potential of blockchain technology
This much is certain: blockchain technology has the potential to revolutionise everyday life in the fields of business and finance in the long term. The blockchain venture capital funds, which are still investing in new technologies, are also aware of this.
Investors are hoping that the big shock of last year will now be followed by consolidation: that the market will grow up and the most promising companies will blossom again.
For this to happen, however, cryptocurrencies need more acceptance. Only a few coins are used for what they were intended for, and only by a few. There is also still a lack of professionalism:
Futures are now tradable here and there, but only on a few exchanges. And even there, there is a strong price link to unregulated crypto exchanges like Binance or Kraken. Moreover, the legal framework for investments by institutions is often lacking.
Blockchain technology is still in its infancy. Increasing regulation by financial regulators, a very gradually growing acceptance, partnerships with already existing companies and the new security-oriented Security Token Offerings, which are visibly replacing Initial Coin Offerings, give reason to hope that the curves will soon tick upwards again.
Conclusion
Cryptocurrency Investing Conclusion - What is the best way to invest in cryptocurrencies?
The big crypto hype was a disaster for many investors. But the technology is here to stay. Those who bet on the right cryptocurrencies can hope for big profits in the long run. Increasing professionalisation and acceptance of cryptocurrencies lead us to believe that prices can soon start to rise again. At least serious projects that have already made a name for themselves on the market will then profit.
Our recommendation: Buy cryptos with eToro
- Incl. wallet
- Buy and sell cryptocurrencies directly in the wallet
- Paypal, credit card and instant bank transfer
- Regulated provider
- Real cryptos or CFD trades
FAQ
Due to the high volatility of the coins, an investment in cryptocurrencies can still produce great returns. The decisive factor is that you buy the coin of your choice at the right time. You should also have the necessary knowledge of how cryptocurrencies work in detail.
This cannot be answered easily. Many factors play a role, including whether the acceptance of the chosen currency increases, what the purchasing power of investors is like and whether crypto exchange hacks or other bad news can depress the respective price.
You can either invest directly in the coin of your choice and hope for price gains, or invest indirectly in the cryptocurrency. This includes trading via CFDs, shares, derivatives and many more. Mining the coins also continues to enjoy some popularity.
Absolutely. If you assume that the coins will continue to gain in importance in the future, then you should invest in cryptocurrencies. It is not unlikely that more and more transactions will be carried out using digital coins in the medium term.
