Best crypto to invest in August 2020: rallies have plenty more room to run
19:20, 20 August 2020
Cryptocurrencies have been on a tear in the past month. Today, many traders are harkening back to the bull run of 2017 when prices moved exponentially higher. It remains to be seen whether digital currencies can break out to new highs, but the economic environment is primed for their value to rise, offering the potential for investors to make positive returns.
Since the launch of Bitcoin, the first cryptocurrency, there have been thousands of other cryptos – known as “altcoins” – introduced. This article rounds up our picks for the top cryptocurrencies to invest in with Capital.com, to help you narrow down your choices.
What has been driving cryptocurrencies this summer?
Cryptocurrencies have been moving up in physical currency terms after a period of consolidation. Like precious metals including gold and silver, investors have been flocking to cryptocurrencies as a hedge against inflation. Central bank measures including quantitative easing and record-low interest rates have devalued the US dollar, driving interest in alternative assets as a store of value. Digital currencies are outside the control of individual governments and as they were designed with limited supply, they are not devalued by inflation.
Bitcoin has spiked by as much as 34 per cent in the past month, touching the $12,000 level for the first time in more than two years. And decentralised finance (DeFi) initiatives – the lending and trading of assets on blockchain – have taken off this summer, giving a boost to the altcoins alongside Bitcoin.
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Best crypto to invest in for August 2020
There are hundreds of cryptocurrencies that are set to rise in value if the rally continues in the coming months. We have picked five of the best cryptocurrencies to invest in: Bitcoin (BTC), Ether (ETH), Stellar Lumens (XLM), Litecoin (LTC), and Quantum (QTUM).
Bitcoin (BTC)
The original cryptocurrency and often referred to as “digital gold”, Bitcoin is often the first port of call for investors entering the crypto market. The price expressed in US dollars has more than doubled since it sank to $5,000 in March, and the technical charts show there is potential for it to continue rallying sharply, establishing a new bull run that could see it test the previous high of $20,000.
Bitcoin went through its third halving in May, which halved the reward for mining coins and, in turn, reduced supply. The previous halvings saw a sharp jump in prices followed by a dramatic selloff to form a higher low, and the third has also preceded a rally.
There has never been more money in the Bitcoin futures market, with open interest reaching a new all-time high of $5.8bn according to cryptocurrency research firm Arcane Research. Bitcoin should have a place in any crypto portfolio, with a balance of altcoins depending on preference.
Ether (ETH)
It was Ether – not Bitcoin – that initially led the rally in recent weeks. Ethereum is a programmable blockchain on which the Ether cryptocurrency runs and which has the ability to support financial services, games and apps. The network is scheduled to transition to upgraded Ethereum 2.0 technology in phases starting this year.
Like Bitcoin, the Ether price has more than doubled from the lows this year. DeFi runs on Ethereum, and the rapid adoption of DeFi applications has ramped up the cost of transaction fees, known as gas fees.
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Technical charts suggest if Ether can hold support above $400, the next level is $500 and there is little resistance until the $800 level.
Stellar Lumens (XLM)
Stellar is a blockchain protocol with a distributed ledger for cross-border transfers and transactions between digital and physical currencies, and Stellar Lumens is the cryptocurrency that runs on the network. Development activity has increased on the network, which aims to provide a currency for emerging markets with underdeveloped banking infrastructure.
The XLM price has soared from $0.03 to $0.11 since March, breaking through resistance after a period of consolidation.
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With support at $0.09, there is potential for a breakout above the $0.12 level after a pullback. It has recently underperformed against the sharp Bitcoin rally, suggesting the altcoin could bounce up to narrow the gap.
Litecoin (LTC)
If Bitcoin is digital gold, then Litecoin is its digital silver companion. The token is set to be upgraded with additional privacy and scalability features to increase the number of supported transactions, which is encouraging a spike in activity.
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Litecoin’s average usage has doubled since the start of the last bull run and is gaining steam, said David Schwartz, project director at Litecoin Foundation, and transactions have outpaced the historical price, indicating the current price is undervalued.
Quantum (QTUM)
The Quantum network overlaps with Ethereum in functionality, which its developers are touting as an alternative for DeFi applications without the rising transaction fees and slower throughput. The QTUM price jumped by 10 per cent after its founder announced a $1m fund on 17 August to encourage third-party developers to create DeFi applications on the Quantum blockchain, pledging up to $5m if the demand is there.
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The crypto price has more than tripled since it bottomed out at $1 in March, spiking above $3.50 after the fund announcement.
Read more: Cardano vs Ethereum: which coin should you invest in right now?
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