The five best cryptocurrencies to invest in for May 2020

 

The most recent overview of the cryptocurrency market

2020 has proven to be a favorable year for the cryptocurrency market thus far. Despite notable volatility, Bitcoin (BTC) has recently surpassed the $10,000 threshold for the first time since February. This surge can be largely attributed to the anticipation surrounding the upcoming Bitcoin halving event scheduled for May 11, which will reduce the rewards miners receive for creating new blocks. The halving process diminishes the supply of BTC and, assuming constant demand, tends to drive price appreciation. Historical data from the 2012 and 2016 halving events reveals significant price spikes in Bitcoin. Beyond this, various factors influence cryptocurrency prices, and one interesting tool for gauging market sentiment is the Crypto Fear & Greed Index. This index integrates six data metrics, including Bitcoin volatility, trading volumes, price momentum, social media sentiment, surveys, Bitcoin market capitalization, and Google trends related to Bitcoin. Following a prolonged period of “extreme fear” in the market spanning seven weeks, the index has recently been on an upward trajectory since late April, approaching a more neutral sentiment.

Best cryptocurrency options for investment in May 2020

The cryptocurrency market’s performance is fundamentally influenced by global financial market volatility, instances of real-world cryptocurrency adoption, and regulatory developments. The unprecedented volatility in global financial markets due to the COVID-19 pandemic has piqued interest in cryptocurrencies as a hedge against traditional investment portfolios. Given their decentralized nature, digital coins and tokens often benefit from low confidence in the global economy and banking system. Furthermore, some investors turn to cryptocurrencies as a hedge against inflation. Prominent hedge fund manager Paul Tudor Jones recently disclosed that his fund has a small Bitcoin position to serve as an inflation hedge. Real-world adoption of blockchain technology can also drive the value of underlying cryptocurrencies. A recent example involves a pilot project between New Balance and IOHK, which employs the Cardano (ADA) blockchain for sneaker authentication. Additionally, Microsoft (MSFT) has partnered with Ernst & Young to develop a blockchain solution for Xbox royalty payments. Significant shifts in attitudes among politicians and central bankers have marked the regulatory landscape. Several central banks are exploring central bank digital currencies (CBDCs), with the Swedish central bank launching a one-year e-krona pilot in February, leveraging distributed ledger technology similar to that used in cryptocurrencies. Notably, China is preparing to trial its new digital currency, e-RMB, in multiple cities, including Shenzhen. China’s aim is to provide an alternative to the dollar-based SWIFT network, potentially reducing global dependence on the USD. The availability of cryptocurrency derivatives, such as futures and options, plays a pivotal role in institutionalizing the crypto asset class. Following the introduction of Bitcoin futures in 2017, the CME expanded its offerings with Bitcoin futures options in January 2020. Around the same time, Bitcoin options trading also commenced on the Bakkt and FTX platforms. While investors await a cryptocurrency ETF, Grayscale’s assets under management surpassed $3 billion by the end of April. Grayscale manages the first publicly quoted trust for Bitcoin and other cryptocurrencies, with prices listed on the OTCQX exchange. All these developments are expected to accelerate cryptocurrency adoption. According to Tom Lee, Head of Research at Fundstrat Global Advisors, the relationship between user growth and value follows a logarithmic function. Doubling the number of users could quadruple the value, a principle central to his Bitcoin valuation target of $25,000 and indicative of a long-term bullish trend in other cryptocurrencies. Which cryptocurrencies are the top choices for investment in May 2020? To assist investors in deciding which cryptocurrencies to invest in, let’s explore the prospects of five major cryptocurrencies:

Bitcoin (BTC)

Bitcoin remains a top choice for cryptocurrency investments. Launched in 2009, it was the first cryptocurrency globally and currently represents approximately 65% of the total cryptocurrency market capitalization. The forthcoming halving event and its impact on Bitcoin’s scarcity are already generating excitement. A reduction in the supply of Bitcoin typically leads to price appreciation, and this time, the rally began ahead of the event as investor sentiment improved, and miners accumulated Bitcoin. While short-term volatility is anticipated, the introduction of futures and options for Bitcoin has enhanced price discovery and provided institutional investors an avenue to participate. Despite some short-term bearish signals, most investors remain bullish, as indicated by Grayscale’s record $500 million inflow into its cryptocurrency products during Q1 2020.

Ethereum (ETH)

Ethereum, the second-largest cryptocurrency by market capitalization, is known for its smart contract functionality. The Ethereum network permits developers to create decentralized applications. In the short term, the transition from Proof of Work (PoW) to Proof of Stake (PoS) with Ethereum 2.0 is set for July 2020, enhancing efficiency and cost-effectiveness. The Ethereum network’s potential extends to executing smart contracts in various domains, such as energy grids and mortgages, and verifying digital asset ownership. Additionally, the launch of customized networks by companies like Microsoft (MSFT), IBM (IBM), and JP Morgan (JPM) is further evidence of Ethereum’s growth.

EOS

EOS, developed by Dan Larimer, is designed to support smart contracts and compete with Ethereum. It offers scalability and is well-funded, having raised an estimated $4 billion through its initial coin offering. EOS has the potential to gain market share from Ethereum by providing a more scalable solution for smart contracts. EOS’ strong financial backing makes it a contender in the cryptocurrency space.

Stellar (XLM)

Stellar, established in 2014, is based on the Ripple network but has since developed its code. Stellar is an open-source, decentralized protocol that facilitates affordable international currency transactions. Stellar’s distributed exchange allows cross-border transactions at the best available exchange rates. With approximately 1.7 billion people lacking access to bank accounts and financial services, Stellar’s capacity to support remittances and micropayments positions it as a compelling cryptocurrency investment for 2020 and beyond.

Cardano (ADA)

Founded by Charles Hoskinson, a co-founder of Ethereum, Cardano is a third-generation cryptocurrency, distinct from Bitcoin and Ethereum. Cardano operates on a layered system, enabling peer-to-peer transactions on its blockchain layer and smart contracts on a separate layer. This approach enhances flexibility, scalability, and security. Real-world applications, like the pilot project with New Balance for sneaker authentication, are likely to boost ADA’s value. The transition to Proof of Stake (PoS) through the successful launch of Cardano’s “Shelley” upgrade is scheduled for July 2020, further supporting ADA’s price. (Note: Cryptocurrency investments are inherently risky, and it’s essential to conduct thorough research and consider personal risk tolerance before investing in any cryptocurrency.) Please be aware that this information is based on various sources and should not be considered financial advice. Investing in cryptocurrencies carries risks, and past performance does not guarantee future results.

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