In this article a deep dive into penny cryptocurrency, an investment vehicle that is brand new for this growing asset class.
Bitcoin (BTC) and many other cryptocurrencies (thousands of them) were created in more than 10 years. Some of them are currently valued at billions of dollars – such as Bitcoin, Ethereum (ETH), or Litecoin (LTC) – while others disappeared without leaving any trace.
However, all these coins had a similar beginning. The majority of them started as penny cryptocurrencies. Bitcoin started to be traded in the open market in 2011 with a price per coin of $0.30. This is much smaller than the current price of around $11,400.
The same happened with other virtual currencies. However, not all of them reached such a large price increase. Despite that, a penny cryptocurrency could certainly have the potential to make you rich or break your financial life.
Disclaimer: This article is for educational purposes only. All the content provided by the author should be considered for educational purposes only and not investment advice. We are not financial advisors. We are not responsible for any investment decision you make. Never invest more than what you are able to lose and always contact your professional financial advisor.
Did Bitcoin Start as a Penny Stock?
Bitcoin started as a penny cryptocurrency. Indeed, when the first transaction in Bitcoin was registered, the so popular Bitcoin pizza day in 2010, Laszlo Hanyecz paid 10,000 BTC for two big pizzas that were worth around $25,00. That means the price per BTC was close to $0,0025.
This can show Bitcoin massively expanded since that moment. Thus, investing in penny cryptocurrency at that time would have made you a millionaire. Nowadays, these two pizzas are worth $113,000,000 at current prices.
Yes, Bitcoin started as a penny cryptocurrency as many other coins. However, not all of them followed the same path as Bitcoin. For example, Devcoin (DVC) in 2013 was worth 0.000326 and nowadays it does not even exist. Thus, investing in penny cryptocurrency, in this case, would have made you lose all your funds.
This is why it is so important to distinguish genuine projects and clear revolutionary solutions in the market. Making a bad decision while purchasing a penny cryptocurrency could lead to financial problems.
What are Cryptocurrencies and Why Where they Created?
Cryptocurrencies were created in order to put an end to financial intermediaries and government intervention in private financial matters. Bitcoin was a success since it was launched in 2009 and it became a clear example of how it is possible to send and receive money in a decentralized way without depending on a centralized authority.
Banks, regulators and financial intermediaries have nothing to say or do when two individuals decide to exchange money using Bitcoin or another decentralized digital asset.
Other cryptocurrencies, also known as altcoins, were created for different reasons. Indeed, it was not necessary for them to become already decentralized. Instead, these digital assets offered new solutions such as smart contracts (Ethereum) or cheaper and faster transactions (Litecoin).
As we mentioned before, there are currently over 5,000 cryptocurrencies around the world. Some of them are worth several billions of dollars while others are considered to be penny cryptocurrencies. However, just a few of them are able to become known and really offer clear solutions to crypto users.
Thousands of other cryptocurrencies have already disappeared. Additionally, many others that didn’t disappear do not have any trading volume or are simply forgotten.
Penny Cryptocurrency Examples That Turned Out to be Scams
There were penny cryptocurrencies that turned out to be massive scams that affected the credibility of the crypto market and that financially damaged a large number of investors in the market.
One of these cryptocurrencies was BitConnect, a digital asset that started out of thin air and that suddenly became one of the largest cryptocurrencies in the world with a price per coin of over $450 in December 2017 and early January 2018.
However, the price of the virtual currency plummeted when it was discovered that the digital currency and BitConnect projects were simply a pyramid scheme. The entire price collapsed and the digital currency was not able to recover from it.
This is one of the reasons why we should avoid investing in penny Cryptocurrencies unless we know the project is going to be in the long run rather than just for some time.
Another scam in the market was performed by Plus Token. This Ponzi scheme attracted users to offer an attractive high-yield investment program. However, in mid-2019, the founders decided to shut down the platform, affecting thousands of investors from all over the world.
The issue has attracted large attention from regulators from several countries, including Korea and China, where many investors were located. Despite a great effort from regulators and law-enforcement agencies to find the owners and administrators of the Ponzi, there are still some funds that could be owned by these stealers and that can dump crypto prices if they eventually decide to sell.
Why Are There Cryptocurrencies Worth Less Than a Penny?
At the moment there are several cryptocurrencies that are worth less than a penny. Some of these cryptocurrencies include BitTorrent Token (BTT), Holo (HOT), DxChainToken (DX), Siacon (SC) or even Dogecoin (DOGE). Their price is below $0.01 and they are among the largest cryptocurrencies in the world (top 100).
Despite having a very low price and being considered penny cryptocurrencies, they have a large market valuation. According to CoinMarketCap, DOGE and BTT have a market capitalization of $427 million and $260 million. This is explained with their market supply.
Their supply of coins is so large that even a small price would make them a multi-million cryptocurrency. If their supply would be lower, it might be possible for them to have a higher price. This is due to the supply and demand effect. With a lower supply such as Bitcoin (21 million), the price tends to be higher.
Of course, supply and demand are not the only factors affecting the price of an asset. However, they are certainly important to understand why some digital assets are worth more or less than others. The market capitalization concept can be more helpful in this case to understand how large and valuable these virtual currencies are.
What is the Best Penny Cryptocurrency To Invest In?
The larger and the older a cryptocurrency, the lower the risk. However, this is not a universal rule. However, larger and older virtual currencies may have higher liquidity, more on-ramps, and exchanges where they can be acquired and more marketing. Smaller cap coins would struggle with the marketing and also with their possibility to reach a large number of users in the market.
DOGE and BTT could be considered the safest penny cryptocurrencies in the market. Nevertheless, as we have mentioned, this is not investment advice. The price of these coins can go directly to zero. Despite this, they can also provide us with a great opportunity if we find repetitive patterns to invest in short periods of time.
As you can see, DOGE has followed a clear path in terms of BTC price. The pattern repeats itself several times and it could continue happening in the coming years as well.
Should Trading Cryptocurrencies be Regulated?
Cryptocurrencies are still far from being 100% regulated. Countries are applying different rules and regulations that could make it difficult for companies to be compliant with all of them. Nonetheless, having a clearly regulated market could be very positive for digital assets.
Larger companies and investors could certainly feel protected if they know firms and crypto companies are offering regulated services to clients. This could push investment in cryptocurrencies and blockchain technology higher.
Other investors claim that having a regulated cryptocurrency market goes against the ethos of Bitcoin and virtual currencies. These individuals and firms would do everything they can to avoid government regulations and they will lobby against these governmental controls.
All in all, we can conclude that the entire cryptocurrency industry is still getting started and maybe a few years away from mainstream adoption. Therefore, many blockchain projects start as penny cryptocurrency with an initial worth of less than $0.01 per coin.
If you are an investor willing to take some risks buying into these cryptocurrencies could give you a ticket to life-changing profits. At the same time, the possibility that your investment is going to zero also remains. For taking the right decisions and be safer, we have written an extensive guide to starting investing in altcoins at reliable exchanges. Maybe a good idea to start doing your research from here!
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