- Penny cryptos are altcoins that have enormous rewards but equally higher risks.
- Unlike well-established cryptocurrencies, these coins have a high probability of rug pulls.
- This article lists the five best penny cryptocurrencies in 2021 to invest in.
Cryptocurrencies saw a massive rally during the 2021 bull run. Altcoins, DeFi blue chips and even meme coins saw their value more than double in a few days to months. This expansion in their price is something that happens during every boom cycle.
Like stocks, Bitcoin price experiences periods of extreme expansion, known as boom cycles, followed by bust cycles. Altcoins typically grow during the boom phase and have a higher rate of return with an even higher risk.
However, it is not easy selecting altcoins since they are a dime a dozen, let alone penny cryptocurrencies. Therefore, this article looks at a list of penny cryptocurrencies that might go exponential in the second leg of the bull run.
The top five picks of penny cryptocurrencies fall under three categories, meme coins, remittance tokens, real-world use-case blockchain tokens.
Here are the top five penny cryptos to buy in 2021
- Dogecoin (DOGE) - the original meme coin.
- Shiba Inu (SHIB) - the dog-themed crypto that has moved on from riding endorsement waves and launched its own DEX.
- Ripple (XRP) - the remittance token that has a huge potential to pop-off if they win the ongoing lawsuit.
- Stellar (XLM) - while similar to XRP in many cases, XLM could massively profit if the outcome of the SEC v. Ripple is negative.
- VeChain (VET) - the blockchain that is already helping clean up the oceans has recently entered the $1 billion pet food industry in China
Altcoins vs. penny cryptocurrencies
Any cryptocurrencies other than BTC are generally lumped together under the “altcoin” moniker. However, these coins can be further classified into multiple categories like:
- ERC-20 and BEP-20: These altcoins are a result of smart contract standards. ERC-20 is for the Ethereum blockchain, while BEP-20 refers to the Binance Smart Chain (BSC). Examples of ERC-20 coins include Uniswap (UNI), Yearn Finance (YFI) and Chainlink (LINK). Pancake (CAKE), Alpha (ALPHA) and Swipe (SXP) are some BEP-20 altcoins.
- Native tokens: These coins are native to their parent blockchains like Ripple (XRP), Stellar (XLM), Dogecoin (DOGE) and so on.
- Sector-based: DeFi coins like Yearn Finance (YFI), Aave (AAVE), Terra (LUNA); meme coins like Shiba Inu (SHIB), Dogecoin (DOGE), SafeMoon (SAFE); and oracle tokens like Chainlink (LINK), Band (BAND) and Augur (REP) are sub-categorized based on similar use cases.
Before heading into the list of the best penny cryptocurrencies to invest in during 2021, let us look at what penny cryptos are and what investing in them entails.
The lowdown on penny cryptos
While the categorization of altcoins is complex depending on the classification aspect, penny cryptocurrencies are much easier to define. They are altcoins worth less than $1, irrespective of the sector they are trying to impact and the blockchain they are based on.
Apart from the price, penny cryptocurrencies can vary in a multitude of ways and can be tracked using risk factors, market capitalization and so on.
Altcoins are relatively riskier due to their volatile nature, but with penny cryptos, the risk increases exponentially due to three reasons: lack of information, liquidity and scams.
- Lack of information: Pseudonymity, a major ethos of cryptocurrencies, is a significant hindrance that lets the developers or creators hide behind anonymous accounts. When investing in cryptocurrencies, it is crucial to know the team working behind the curtains, which helps gauge their intentions to an extent. Moreover, the projects tend to skip audits, which more often than not lead to loss of funds or scams.
- Liquidity: The recent bull run saw many meme tokens launch on decentralized exchanges (DEXs) without audits and very little liquidity. Moreover, the token distribution was skewed with massive concentration among the project creators. Therefore, penny cryptocurrencies are usually subjected to “pump and dump” schemes. The best example of this was a coordinated pump and dump of XRP on February 1, 2021, which at one point hit more than 100,000 members on Telegram.
- Scams or rug pulls: Rug pull is a phrase used to describe a project whose founders drain the projects out of investors’ money and abandon the project, leaving investors high and dry. The bull run of 2021 saw many projects experience rug pulls. SushiSwap was the only project that recovered after an exit scam, while a large majority of them crashed and burned. While the risks involved with penny cryptocurrencies are inherent, the rewards often far surpass the returns on altcoins and Bitcoin.
SushiSwap’s creator Chef Nomi came back to the space after debates and the intervention of FTX’s CEO Sam Bankman-Fried. For the record, Chef Nomi made it away with 38,000 ETH worth roughly $14 million at the time (worth $126 million now).
This is what the exit scam transaction looks like.
SushiSwap rug pull transaction chart
However, after six days, the creator returned the stolen 38,000 ETH.
To everyone. I fucked up. And I am sorry.— Chef Nomi #SushiSwap (@NomiChef) September 11, 2020
According to Cipher Trace’s reports DeFi rug pulls and scams accounted for 99% in the second half of 2020. This move from the scammers was oddly reminiscent of the 2017 ICO frauds.
Regardless, the total value locked in DeFI is around $85 billion, roughly around the same level as it was during the peak in May 2021.
DeFi TVL chart
The astronomical difference in returns between penny cryptos vs. main cryptos can be seen in the chart below. Shiba Inu, a dog-themed meme coin, saw a 734,526% increase in its value from August 20, 2020, to its peak on August 10, 2021. Bitcoin, on the other hand, rallied roughly 515% during the same time.
Other penny cryptos saw returns up to 8,400%, which more than speaks for the rewards as compared to main cryptos like Bitcoin or Ethereum.
BTC vs. penny cryptos returns chart
As Bitcoin price hovers around the $60,000 psychological level, things have taken an unexpected turn in the land of penny cryptocurrencies. Meme coins have stolen the spotlight from other altcoins. While ERC-20, BEP-20, DeFi tokens partook in the short-term uptrend, remittance tokens like XRP and XLM have not seen impressive gains. On the meme coin front, Shiba Inu, aka the so-called “Dogecoin killer,” has held up to its name as it rose a whopping 1,229% since September 1, while DOGE has seen a 24% return in the same period. With analysts predicting Bitcoin to hit $100,000 or more, the bull run seems to have just begun. Hence, the potential for this category of altcoins to flourish is massive. As more retail investors join the fray, the more explosive the uptrend for meme coins will be. Therefore, investors need to keep a close eye on penny cryptos to invest as 2021 comes to an end.
So, without further ado, here are the best penny cryptocurrencies in 2021 to invest in.
Best 2021 penny cryptocurrencies
These coins were created for the sake of memes or jokes and usually do not have any utility. However, Shiba Inu seems to have taken the concept of meme coins one step further as it launched ShibaSwap DEX and has plans to further implement Shiba Inu Incubator, a platform to incubate holders and incentivize them, and Shiba Rescue, where the creators use ‘Amazon Smile’ to collect and donate a percentage of your Amazon purchases to the Shiba Inu Rescue Association.
- Dogecoin (DOGE):
Dog coins or meme coins garnered so much popularity that they were featured in mainstream media. Dogecoin is the original meme coin created in 2013 as a joke and had the logo of a Shiba Inu dog. While the altcoin went lull for a few years, Elon Musk’s tweets resuscitated it.
DOGE was the only altcoin that enjoyed Musk and other celebrities’ free promotion for a while, but things changed as other meme coins emerged. Learn How to buy dogecoin
- Shiba Inu (SHIB):
Shiba Inu is one such dog-themed cryptocurrency that saw a massive 734,526% run. On the other hand, the Dogecoin price returned 23,022% from August 2020 to its peak on May 8.
Ripple was designed using proof-of-stake to create a better blockchain that is more efficient than Bitcoin with the capacity to handle real-world applications. Stellar Lumens follows a similar path but is in less of a dilemma than Ripple and has not run-ins with authorities.
- Ripple (XRP):
The concept behind remittance tokens is to increase the efficiency of cross-border transfers. Ripple was created with this in mind and is currently teaming up with banks and institutions worldwide.
Although the origins of Ripple and XRP are shrouded in mystery, the investors seem to have no problem with it. Moreover, the current battle with the Securities & Exchange Commission (SEC) has helped Ripple’s case in some cases, but a win would most definitely be a positive development for its partners and XRP price.
XRP price saw a 670% growth from August 2020 to its peak on April 14 but has room to grow.
- Stellar Lumens (XLM):
Stellar Lumens is also facing the same direction as XRP but supports various projects to build on it and has strong fundamentals.
Check out our stellar lumens (xlm) guide
- VeChain (VET):
VeChain price saw a roughly 1,500% increase between August 2020 and August 2021 and started rallying well before many altcoins. VET is a blockchain-based supply chain platform that focuses on real world problem-solving.
Its partnership with the ReSea project has made palpable developments, cleaning oceans, rivers, and other water bodies from plastics. This progress is a result of the tie-up between VeChain, ReSea and DNV.
Due to the real-world applications, VeChain has room to grow as they partner with more industries.
The other five penny cryptos that did not make it into the list but are worth mentioning include:
- Basic Attention Token (BAT).
- Decentraland (MANA).
- The Graph (GRT).
- Ravencoin (RVN).
- Zilliqa (ZIL).
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