Cryptocurrency: which virtual currency to invest in in 2023?

Cryptocurrency is a virtual currency or alternative currency that is creating a lot of buzz around the world. What are the different types of virtual currency available? How to invest in crypto-currencies? Comparabanques deciphers how a cryptocurrency works, the risks to avoid and the best trading platforms for cryptomoney in 2023 .

Offers ranked with consideration by Selectra by price and features. Data updated in March 2023

🔐 What is cryptocurrency?

A crypto-currency is a virtual currency that uses a decentralized computer network, called the Blockchain, to be exchanged peer-to-peer without intermediaries between participants. In this sense, cryptocurrency escapes any definition that can be given to a national currency (Euro, Dollar, Pound Sterling, etc.). The virtual currency differs in several major aspects:

• Cryptocurrency is an alternative currency: it does not borrow from the traditional banking system. The production of cryptocurrency is decentralized and does not depend on any institution or legal tender. As an electronic currency or crypto-asset, it exists only in the ecosystem created by the Blockchain;
• Cryptocurrency is dematerialized: the absence of a physical medium distinguishes it from other currencies (bills, coins, checks) issued by central banks;
• Cryptocurrency escapes any control body: there is no legal framework on virtual currency ;
• Most cryptocurrencies are characterized by their monetary cap: the number of tokens is voluntarily limited, giving the cryptocurrency a scarcity character and also limiting any risk of inflation.

The first cryptocurrency is Bitcoin. First appearing in 2009, Bitcoin was created by a Japanese computer scientist under the pseudonym Satoshi Nakamoto. In 2021, there are more than 2,000 cryptocurrencies in the world (the most famous of which are Ethereum, Litecoin, Bitcoin cash, Ripple, Dash).

⚙️ How does cryptocurrency work?

The exchange of cryptocurrency is governed by the Blockchain protocol, a gigantic decentralized database composed of a set of computers around the world. The technology is based on the principles of cryptography to secure and ensure traceability of cryptocurrency exchanges between users. The code of the Blockchain is thus considered inviolable.

When two users agree on an exchange, the transfer of ownership of a cryptocurrency is validated and then recorded by miners (network members) in a public, virtual ledger on the Blockchain. This is known as cryptocurrency mining. Each transaction lists the amount of the transaction, the name of the sender and the recipient.

Subsequently, the exchanged cryptocurrency is stored on the virtual wallet belonging to the buyer. This cryptocurrency wallet is defined by a public key used to identify oneself during the transaction and a private key (password) to validate the cryptocurrency transfer.

Used in its early days by an audience of insiders, cryptocurrency is beginning to democratize to reach a wider audience. Today, it is possible to use cryptocurrency to:

• Make online payments for certain services or consumer goods;
• Investing: cryptocurrency trading via the purchase or sale of crypto-assets can be a very lucrative investment over time ;
• Convert virtual currency into monetary currency;
• Exchange your crypto-currencies for other crypto-currencies.

• What are the risks associated with cryptocurrency?
• The risks of cryptocurrency volatility: market fluctuations can regulate the value of a cryptocurrency up or down (law of supply and demand).
• Liquidity risks of cryptocurrency: the lack of liquidity of cryptocurrency (physical medium: bills, coins) makes it very difficult to trade with a legal tender.
• Hacking risks: digital wallets and some trading platforms are not guaranteed against the risks of hacking and data theft.
• The legal risks of cryptocurrency: in the absence of a regulatory framework, most cryptocurrencies escape any regulatory body.

📈 Crypto currency rates: how is the virtual currency valued?

As we have just discussed, cryptocurrency is defined mainly by its decentralization: no central authority exists to control the cryptocurrencies in circulation. For all that, like any traditional financial asset – stocks, bonds, currencies – the price of cryptomoney is subject to multiple influences. What are the factors impacting the price of a crypto-currency?

Generally speaking, the price of a cryptocurrency is determined by the law of supply and demand. The value of a cryptocurrency evolves according to :

• The popularity of a cryptocurrency: a virtual currency like Bitcoin enjoys real public interest and good media exposure. Driven by a strong craze, the value of this crypto-currency can reach dizzying heights.
• The level of trust among users: the more trust there is, the more demand there is, so the price of the cryptocurrency is likely to soar.

Because of this, the market capitalization of a crypto-currency is heavily tied to speculation. This makes it quite difficult to determine the true value of a crypto-currency. The price of a crypto-currency is usually an average of the crypto-currency price observed on virtual exchanges around the world. As an example, Bitcoin has been trading at an average of $45,000 since the beginning of 2021.

💎 Promising cryptocurrencies: ranking 2021

Which crypto currency to choose to invest some of your capital? What are the rankings of the most promising crypto-currencies? Bitcoin, Ethereum, Bitcoin cash, Litecoin, etc. are all names of popular crypto-currencies. For all that, is there a new crypto-currency to invest in 2021?

As a reminder, investing in a crypto currency involves a degree of risk. We therefore recommend that beginner traders turn to the leading virtual currencies in the market.

To get an idea, here is Comparabank’s ranking of the top cryptocurrencies by market capitalization:

Offers ranked with consideration by Selectra by price and features. Data updated in March 2023

A crypto-currency is also an investment product synonymous with boldness and profitability if you know how to choose them well. Comparabanques presents you the promising crypto-currencies of 2021: emerging nuggets to discover without further delay!

• Emerging cryptocurrencies: our selection
• Tezos (XTZ) from the French Blockchain. Designed on the same principle as Ethereum, this crypto-currency benefits from the growing interest of institutions (Centre de Lutte contre les Criminalités Numériques C3N) and large companies (EDF, Société Générale);
• Stellar Lumens (XLM) is a cryptocurrency and decentralized payment network capitalized $9 billion ;
• Aave (AAVE) with a capitalization of $4 billion in early 2021, this virtual currency focuses on the crypto borrowing and lending market;
• Dash (DASH) is valued at $2 billion. This cryptocurrency is positioned on fast transactions (instant fund transfers) and anonymous cryptocurrency purchases/sales ;
• Elrond (EGOLD) capitalized $1.8 billion, is a more advanced cryptocurrency than Ethereum.

💸 How to buy cryptocurrency?

Today, buying crypto-currencies is a very popular investment for seasoned traders or budding stock marketers. Like any financial investment, investing in cryptocurrency involves mastering a few intricacies; so how do you buy cryptocurrencies and grow your starting capital?

If you want to invest in cryptocurrency, you have three options:

1. Buy cryptocurrencies via CFDs offered by some online brokers. The CFD (Contract For Difference) allows you to invest in the positions of a cryptocurrency without actually owning the virtual currency. The investor does not own the crypto-asset as he may own a stock. As a result, buying crypto-currencies via CFD exempts the user from opening a virtual wallet;
2. Buying or selling via a cryptocurrency exchange platform or exchange. It is necessary to open an account and to have a wallet to trade virtual currencies. Each cryptocurrency exchange platform is like a marketplace/exchange where cryptocurrencies are bought and sold;
3. Buy cryptocurrency on a peer-to-peer platform. The exchange of cryptocurrency is done directly (peer to peer), without a trusted third party. Seller and buyer agree freely, which facilitates the fluidity of exchanges and reduces transfer costs. However, trust remains essential in this type of purchase, which makes the method less popular today.

Can we buy cryptocurrency anonymously? Cryptocurrencies attract many investors, and obviously scams of all kinds. To limit the risks of hacking and theft, governments have strengthened control procedures on cryptocurrency exchange platforms or licensed online brokers. Every user must fill out a KYC (Know your Customers) form where their full identity is specified. However, it is still possible to buy virtual currency without verification. In addition to respecting your privacy, some anonymous cryptocurrency platforms (LocalBitcoin) allow you to use a payment method prohibited by licensed platforms such as prepaid card or Western Union.

🏆 Best crypto currency platform to invest in 2021

Many individuals are seduced by investing in cryptocurrency. Yes, but how to invest in the virtual currency? On this point, the guidance is essential and the choice of a trading platform or cryptocurrency exchange must be the subject of all attention. Everything must be studied with a magnifying glass: the conditions of access, the availability of customer service, and of course the rates of online platforms or brokers!

Comparabanques presents its TOP 3 best cryptocurrency platforms in 2021 :

Offers ranked with consideration by Selectra by price and features. Data updated in March 2023

*Commission applicable on the amount of the transaction (purchase or sale of cryptocurrency)

Choosing the right crypto-currency platform

There are a lot of crypto-currency platforms out there. There are dozens, probably even hundreds of them in the world. Yet, choosing a crypto platform that suits you is not that complex. We usually always look at the same things when we want to choose the right crypto currency platform.

Who is the platform for?

The platforms are not really for the same people. There are some that are going to be easier for beginners because they are very simplified and others for people who are more advanced. It is also possible that some are more suitable for long term investment and others for short term. Generally, this can be seen in the amount of fees associated with placing your orders. Like any other trading site, there are platforms that will be more expensive in terms of fees and others that will be cheaper.

It is therefore important to know your investor profile and clarify your goals with cryptos before choosing your platform. Then you can simply choose the platform that best suits your needs.

What cryptos are available?

This is a pretty logical but nonetheless essential point when choosing a crypto currency platform. Make sure that the cryptos you are interested in are available.

Is the platform sufficiently secure?

There is also a notion of security, we are still in an ecosystem that is not yet completely regulated so there are people who are not necessarily serious. There are scams and it is therefore important to orient yourself towards the biggest platforms, which are sometimes very cheap. At the top of the list, unquestionably, you will find Binance. It is THE reference on the market.

The ultimate security does not exist but Binance a very solid crypto currency platform! There are guarantees, insurance and generally billions are processed every day. On the other hand, it is a crypto exchange that is much more complicated than the small beginner exchange, where there are just three buttons to click to buy bitcoin.

🧐 Our tips for investing well in cryptocurrencies

Investing in cryptocurrencies as attractive as Bitcoin or Ethereum is risky, and has a number of scammers of all kinds to avoid! How do you sort through the different cryptocurrency platforms available? Which crypto-currencies to choose? Which investment strategy to adopt? Comparabanques gives you its 5 tips to invest winningly in a virtual currency :

1. Check the accreditation of the cryptocurrency exchange platform or online broker: trust is the number one criterion for choosing your portfolio manager. There are several digital asset service providers (DASPs) available in the market, with varying levels of credibility. To avoid scams, we recommend that you refer to the Autorité des Marchés Financiers (AMF). Since the PACTE Law, all PSANs must register with the AMF;
2. Check the rates of online brokers or exchange platforms which can vary from one to two depending on the provider;
3. Learning to trade on cryptocurrency and understanding the blockchain system are almost mandatory steps to evolve independently in trading ;
4. Learn about the value of a virtual currency. Some cryptocurrencies are not limited in units, which can cause deflation and a drop in the price of the virtual currency ;
5. Diversifying your portfolio of financial assets is the basis of any investment strategy. Mixing your investments in financial assets with different risks allows you to limit capital losses.