New to cryptography? Here’s what to buy

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Trying to make sense of crypto-currencies can be a bit overwhelming for investors. It is a nascent but promising technology-based asset class that has the potential to disrupt a wide range of industries. Probably what is most appealing to investors is the possibility of life-changing returns.

Do not worry. You are not late for the crypto night. We’re probably still in the early stages, giving you plenty of time to put some money into work and learn more about this booming market.

If you are new to crypto, look no further than these three investments.

Image source: Getty Images.

1. Bitcoin: the currency of the Internet

The world’s first and most valuable cryptocurrency is Bitcoin (CRYPTO: BTC). Released in 2009, it now has a market value of over $ 800 billion. What made Bitcoin truly revolutionary was that it became the first peer-to-peer payment network that did not require a central authority to process transactions. This decentralization was a much bigger deal than it initially seemed.

Due to its limited supply (there will never be more than 21 million coins), Bitcoin is generally considered the equivalent of digital gold. But if its legitimacy as true inflation hedge is questionable, the feedback has been exceptional. Over the past five years, Bitcoin has jumped over 4,500%, easily making it one of the best assets to own during that time. Cathie Wood of Ark Invest estimates that Bitcoin will be worth $ 500,000 by 2026 as more institutional investors allocate a small percentage of their portfolios to digital assets.

Besides being a speculative vehicle, the actual utility of Bitcoin is on the rise. El Salvador recently became the first country to accept it as legal tender. In other developing countries whose economies rely heavily on remittances, sending Bitcoin home to family members (and avoiding the high fees of money transfer companies) makes a lot more financial sense.

2. Ethereum: Tthe decentralized computer of the world

You’ve probably also heard of Ethereum (CRYPTO: ETH). Worth around $ 400 billion, making it the second most valuable cryptocurrency, it differs from Bitcoin in that it is a programmable blockchain. This means that developers can use it to create and support smart contracts or self-executing computer programs. Like Bitcoin, Ethereum is decentralized. But unlike Bitcoin, it offers a lot more features.

Mark Cuban, the billionaire Shark aquarium investor and owner of the Dallas Mavericks in the NBA, is one of the biggest believers in Ethereum mainly because of its usefulness. Decentralized applications (dApps), including decentralized finance Non-fungible products and tokens (NFTs), are mostly built on the Ethereum network. New projects will certainly gravitate towards Ethereum.

Besides the growth of dApps, which have the potential to disrupt industries like financial services and social media, there are two important reasons to believe that Ethereum’s fantastic run, gaining over 35,000% in the past five years, is far from over. First, talent is flowing to the platform. Ethereum has the largest developer network of all cryptocurrencies.

Second, while Ethereum’s proof of work consensus protocol limits network scalability, an update called ETH2 is expected to be implemented this year. If executed correctly, this could be a major catalyst, drastically reducing Ethereum’s power consumption while increasing transaction processing speed, giving it a leg up on Bitcoin.

3. Coinbase: Building the crypto-economy

In my opinion, the best stock in the crypto universe is a company called Coinbase (NASDAQ: COIN). The leading crypto brokerage and exchange company in the United States became a publicly traded company in April 2021, and it has been an extremely volatile stock from the start. Indeed, around 90% of its sales come from unpredictable trading fees, a source of income that can fluctuate from quarter to quarter depending on the evolution of cryptocurrency prices.

Management is trying to diversify the business by focusing on increasing subscription fees and services. Coinbase Prime offers institutional investors advanced trading, custody, and analysis features. Coinbase Cloud is a development platform that has the potential to be the Amazon Crypto web services. And the planned launch of Coinbase NFT, a marketplace for creating, collecting and discovering NFTs, will certainly attract new users and support higher levels of engagement.

What makes Coinbase attractive as an investment is that individuals don’t have to guess which cryptocurrencies are going to soar. Buying stocks is essentially a gamble on the growth of the entire crypto market. Coinbase is building the infrastructure to bring crypto from the periphery of the financial world to the mainstream. Its powerful brand, relentless focus on safety, and excellent financials (50% profit margin) make the stock worth owning.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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