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Why the cheapest cryptocurrency doesn’t always make the best investment

The cheapest cryptocurrency isn’t always the best. Here are some of the main factors you should remember when picking a coin to invest in.

Over the years, many traders have tried the tactic of hunting down the cheapest cryptocurrency they can find – snapping up thousands upon thousands of tokens for fractions of a cent each. The strategy seems simple: holding them for long enough means they’ll grow in value, perhaps to 50 cents, $1 or even more, meaning the investor enjoys a very healthy payday. 

Unfortunately, the cheapest cryptocurrency to invest in is very rarely the best. Just like penny stocks are fraught with danger – with low liquidity and sky-high volatility amplifying the risks of losses – bargain basement altcoins should be treated with care. According to the cleverly named DeadCoins.com, there are now almost 2,000 cryptocurrencies which lie dormant, either because they were a scam, fell out of use or were targeted in hack attacks. 

Instead of asking what is the cheapest cryptocurrency right now, it’s better to focus on which cases have a compelling use case – a reason to exist. Following on from the ICO boom in 2017, the market was flooded with coins that were attempting to ride on the tails of Bitcoin. Many of these projects experienced a brief spike in value before crashing spectacularly, and investors had a slim chance of recouping their returns. 

Beyond the issue of the cheapest cryptocurrency in terms of price, there are other ways of seeking value. The prospect of making returns can rise substantially if you do your due diligence and invest in altcoins that have real potential for attracting a user base in the future. Here, we’re going to look at how to find the cheapest cryptocurrency with the most potential – and we’ll offer top tips on how to reduce the costs associated with purchasing digital assets on exchanges, too. 

The cheapest cryptocurrency projects with the most to offer 

So… let’s look at three altcoins that some analysts are tipping for great things in 2020. They may not be the cheapest cryptocurrency in terms of price, but they could enjoy decent levels of growth in the coming months, especially if the market embarks on a bull run. 

First up, we have the Basic Attention Token (BAT). As we mentioned before, investing in projects which have a genuine purpose can often be a winning strategy to take. This altcoin is used to reward web browsers whenever they view adverts while protecting their privacy and ensuring that ads gobble up less data.

BAT grew in price from $0.13 to $0.19 over the course of 2019 – that’s almost an increase of 50 per cent. Year to date, it’s peaked at $0.32, but like other tokens it fell victim to Black Thursday. That said, BAT’s bounce back from lows of $0.08 seen in March has been impressive – at the time of writing, it’s surged 135 per cent from this level.

Others believe that Zcash (ZEC), an altcoin that uses zero knowledge cryptography to provide privacy transactions, has excellent utility and could prove to be the cheapest cryptocurrency investment in the long run. It too has recovered remarkably from March’s lows of $18.94 – recently trading at levels that were 158 per cent higher.

And we round off the top three with the Synthetix Network Token (SNX). This altcoin is the native token of the Synthetix platform, which allows real-world assets such as stocks, foreign currencies and commodities to be tokenised on the Ethereum blockchain.

Cheapest way to exchange cryptocurrency 

To make the cheapest cryptocurrency purchase possible, you’ll want to look around for a platform that doesn’t penalise you too much for converting fiat. Do remember that certain payment methods can command punishing fees, such as using a debit or credit cards. You probably won’t find too much variation in the charges imposed by different trading platforms, because these fees are actually set by payment processing companies such as Visa. 

You should also do your due diligence to make sure that the exchange is offering the fair market rate for cryptocurrencies. Platforms that charge above the odds for coins will rip you off, while those who claim to sell tokens for less than what they’re worth now could be sham platforms where your capital is at risk.

Last but not least, don’t forget that you’ll want to opt for a crypto exchange that has strong levels of liquidity. Without high trading volumes, you could find it exceedingly difficult to buy and sell coins on demand, creating delays that mean you miss out on potential gains or exacerbate losses.

Why finding the cheapest cryptocurrency can be dangerous 

Many people have ended up losing eye-watering sums of money in their quest for the cheapest cryptocurrency. They’ve been drawn in by tokens that appeared to be competitively priced – with these projects promising astronomical levels of returns in just a few short months. There was only one problem: they turned out to be Ponzi schemes.

Research from Chainalysis shows 92 per cent of the $4.3 billion lost to crypto scammers in 2019 was linked to Ponzi schemes. One single project, PlusToken, was responsible for $2 billion of this. Always remember that if something is too good to be true, it probably is.

Will Bitcoin ever be the cheapest cryptocurrency?

Naturally, very few of us think of Bitcoin as the cheapest cryptocurrency out there. However, some analysts argue that, given how some forecasts project BTC will hit $100,000 next summer and $288,000 some time before 2024, it’s a great deal at the current price.

There are a lot of costs that go into Bitcoin, as our infographic shows:

When you see these stats in front of you, it’s pretty staggering to think that Bitcoin’s energy consumption per year is comparable to an entire country. The sheer volume of electricity spent during a single transaction is equally astounding. 

There’s little suggestion that Bitcoin will ever be the cheapest cryptocurrency to produce – if anything, the energy consumption and financial cost associated with mining new coins is only going to increase. That’s because the number of new Bitcoin entering circulation has just fallen by 50 per cent as a result of the halving.

FURTHER READING: Year in review: biggest cryptocurrency scams of 2019

FURTHER READING: How do crypto exchanges work?

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