How long will it take you to save up and buy 1 BTC? The current price is around £16,600, and sadly, many people may never be able to afford it. Hence, they search for how to buy penny cryptocurrencies as these coins are relatively inexpensive, and they can buy hundreds, if not millions, of units.
While shopping for penny cryptocurrencies is not an entirely bad idea, it might end up being bad if it leads one to buy into a project with no potential; simply because the coin's price is cheaper.
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Before we dive deep into penny cryptocurrencies, we'll try to explain what they are in the simplest way possible.
What are penny cryptos?
Penny cryptos are cryptocurrencies that have low unit prices.
For example, if you spend £100 to buy Bitcoin (BTC) at its current price of £16,600, you'll only get 0.0006 BTC. On the other hand, if you spend £100 to buy a coin like VeChain (VET), which has a current price of £0.019, you'll get 5,032 units of VET.
For this reason, we say that VET is penny crypto and Bitcoin isn't. It does not mean that VET has more potential to be a better investment than Bitcoin. You simply get more coin units than you would have if you bought Bitcoin.
Additionally, it is worth understanding that price is simply a function of demand and supply. VET trades at a far lower price than BTC because VET has a larger coin supply than Bitcoin.
At the time of writing, 72.5 billion VET coins are in circulation, compared to 19.17 million coins for Bitcoin. The lower the token supply, the more likely the price per unit will be higher.
Why invest in penny coins
As noted earlier, Unit bias (the inbuilt human desire to own a full unit of an item instead of a fraction) is not enough reason to invest in penny coins.
Instead, here are the three primary reasons why people buy penny coins.
Project Potential: Despite having a larger coin supply, certain penny cryptocurrencies belong to projects with a working product and the potential to attract even more users and investors in the future.
A recent example is Polygon (MATIC) which traded below £0.05 for several years before exploding in 2021 to the list of largest cryptocurrencies by market cap.
Anyone who noted the potential of MATIC when it was a penny coin would have made substantial profits even at its lower price of £0.66 (MATIC hit an all-time high of £2.18 in 2021.)
Higher Returns: While Bitcoin undoubtedly remains the market leader, many penny cryptocurrencies (although far riskier investments) have yielded far greater returns in the past few years.
A ten-time increase in Bitcoin's current price will see it trade at £186,000 and probably take longer to achieve. However, it is not unheard of for penny cryptos to pull off such a massive movement within a few hours, weeks, or even months.
Such a move is possible because a lower amount of money is needed to move the price of penny cryptocurrencies. On the other hand, Bitcoin needs many new and big-money investors to push its price significantly.
Passive Income: Many penny cryptocurrencies run a Proof-of-Stake (PoS) consensus mechanism, allowing users to earn passive income from staking their coins to secure the network. Hence, when you buy some of these coins, you're not only going to profit from future price growth, but you can also earn passive income ranging from 6-10% APR depending on the coin.
Many exchanges and lending platforms allow investors to earn interest on Bitcoin. However, this comes with additional risks as token incentives are not baked into Bitcoin's economic model. These platforms must lend customers' BTC to earn yield.
Top-5 Penny Cryptocurrencies List
Ripple (XRP)
XRP is a digital currency launched by Ripple Labs, a fintech company based in San Francisco. The coin works alongside the XRPL Ledger developed by the company and primarily helps financial institutions complete cross-border money transfers instantly and at significantly lower prices.
XRP has a maximum supply of 100 billion coins, with a majority (over 60%) held by the company and its founders. Some of the company's and founder's holdings are sold in the open market at times, a development that many believe has suppressed the price of XRP.
Ripple and its founders are currently facing charges from US authorities, but this has not recently stopped the price of XRP from soaring.
XRP market cap: £20.8 billion
Cardano (ADA)
Cardano is a blockchain project launched by former Ethereum co-founder Charles Hoskinson. Like Ethereum, Cardano now offers smart contract functionalities and has a handful of decentralized applications built on the network. The price of ADA continues to soar with the hope that the project eventually gains traction.
ADA is often marketed as the "Ethereum killer," even though it has fewer users and applications built on it now. ADA has a maximum supply of 45 billion coins.
ADA market cap: £11 billion.
Stellar (XLM)
Stellar is another cryptocurrency project that facilitates micropayments for financial institutions and mainstream users.
Stella's co-founder Jed McCaleb formerly worked as chief technology officer (CTO) for Ripple but moved on to launch Stellar and XLM after a rumoured disagreement with other founders.
Like XRP, transactions with XLM cost a fraction of a cent, and the project continues to explore partnerships with payment companies that can adopt the cryptocurrency.
XLM has a maximum supply of 50 billion coins.
XLM Market Cap: £2.5 billion
Dogecoin (DOGE)
Dogecoin is a meme cryptocurrency created in 2013 by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer. The coin was an attempt to poke fun at the abundant number of cryptocurrencies that were launching at the time with little or no utility.
However, Dogecoin garnered more public interest than most cryptocurrencies and has survived for almost a decade.
The Dogecoin brand features an image of a Shiba Inu dog, and the project's founders forked the underlying code from the Litecoin cryptocurrency.
Dogecoin has an unlimited supply of 10,000 DOGE coins entering circulation every ten minutes. That equates to roughly 5 billion coins per year, which most new-age Dogecoin investors probably do not know.
In 2021, Dogecoin gained even more popularity, publicly touted by Tesla CEO Elon Musk in a meme-like fashion and on several occasions. This pushed the price of DOGE to its all-time high of £0.52 later that year and into the top ten cryptocurrencies by market capitalization.
While public interest has waned since then, DOGE remains a popular penny cryptocurrency with a loyal community of supporters across social media platforms, including Reddit.
Dogecoin Market Cap: £6.8 billion.
VeChain (VET)
VeChain is a China-based project with a focus on developing enterprise blockchain solutions. The project, led by founder Sunny Lu, counts many Chinese and foreign companies as partners.
The native blockchain, VeChain Thor, supports use cases such as supply chain tracing and application development on its network. The native token VET has a maximum supply of 86.7 billion coins.
VET market cap: £1.4 billion
Where to buy penny cryptocurrencies
Binance
Binance is one of the world's largest cryptocurrency exchanges in terms of trading volume. The exchange became famous due to its initial business model that prioritized giving investors access to penny cryptocurrencies.
Even so, Binance is usually one of the first platforms to list exciting and new crypto projects with a substantial user base.
Binance also has Launchpad and Launchpool platforms that give investors access to newly launched tokens before they become publicly available.
The exchange also supports multiple fiat currencies, and you can learn more about Binance in our complete review.
KuCoin
KuCoin is another cryptocurrency exchange that launched around the same time as Binance. It offers nearly identical services, although Binance has the upper hand in terms of trading volume and listed pairs.
However, you can find a handful of penny cryptocurrencies on KuCoin, including those mentioned earlier.
Like Binance, KuCoin has its Launchpad platform called KuCoin Spotlight. The platform allows new projects to sell their tokens to users before they eventually get listed on the platform.
KuCoin primarily supports crypto-to-crypto trading, although you can also deposit fiat via credit or debit card using one of its listed partners.
Kraken
Kraken launched in 2012 and offered one of the first gateways for accessing penny cryptocurrencies. However, the recent proliferation of the market with thousands of coins and Kraken's regulatory status means that the platform no longer supports some of the most widely traded cryptos today.
However, the good thing is that Kraken still allows access to some of the most large-cap altcoins and penny cryptos.
Kraken users can deposit fiat via bank transfers and bank cards. The platform also allows direct crypto-to-crypto trading, staking of PoS coins, and many other features.
Coinbase
Coinbase did not start as a typical penny crypto exchange. The platform initially listed only large-cap coins primarily for regulatory reasons. However, Coinbase has rapidly accelerated the listing of cryptocurrencies on its platform since going public.
Coinbase now offers investors exposure to more penny cryptocurrencies, listing over 120 cryptocurrencies at the time of writing. The Coinbase interface is excellent for new investors and allows for fiat deposits via bank transfers, credit and debit cards.
SimpleSwap
SimpleSwap has made the cryptocurrency exchange process simple, safe, and comfortable. It has 400+ crypto and fiat currencies available for exchange. The platform is available as a web service and mobile app for iOS & Android.
On SimpleSwap, customers don’t have to sign up or store funds on the platform. SimpleSwap provides two exchange types: floating and fixed rate. You can always choose the most suitable option. Moreover, SimpleSwap offers its customers and partners an Affiliate Program and a Loyalty Program where they can earn crypto cashback.
Changelly
If you want to buy penny cryptos and send them directly to your custodial wallet, you'd probably prefer to use Changelly or other cryptocurrency brokers.
Changelly aggregates a list of platforms where you can buy crypto and allows you to provide an address where the funds will be transferred. Once they receive your fiat payment, Changelly will transfer the coin to your designated address.
Using Changelly, you can exchange one crypto for another, for example, BTC, for any supported penny crypto.
How to find the best cheap cryptocurrency to invest
There is no one-size-fits-all approach to finding the best cheap crypto to invest in. However, you can increase your chances of success by considering the following:
Development Team: The best crypto projects boast a solid, experienced team of developers and executives. Their portfolios are also easily accessed on their website or other relevant web pages. Reviewing such information can help you determine whether or not they have the pedigree to deliver the product or service they’re promising.
Exchanges Listed: When you consider which penny crypto to buy, it is worth finding out on which exchanges the coin is listed (must be reputable) and the trading volume.
That way, you can ensure enough liquidity whenever you want to sell your coins. Many investors have ended up holding billions of worthless tokens that are not actively traded on exchanges.
Tokenomics: As noted earlier, most penny cryptos have a sizeable token supply. A portion of this supply usually circulates, while the remaining amount is brought into circulation over time. The release of these tokens usually dilutes the coin's market price, especially if there is no sustained demand.
Hence, it is recommended that you stay clear of penny coins that have less than 25% of their total supply in circulation. The future release of outstanding tokens might make it difficult for the coin to grow in price.
Community: Ultimately, a strong community plays a significant role in the success of a crypto project. They are usually hard at work promoting the asset or product and trying to onboard new users.
You might find it helpful to hang around online communities (Telegram, Reddit, Discord) for whichever coin you want to buy and gauge the sentiment of earlier investors. Also, consider how transparent the project team communicates with the community, as this often shows whether or not they’re committed to building.
Price History: Review historical price action for each coin on your radar, considering previous all-time highs and lows. Buying a coin when the price is near the top ultimately means you might have to wait longer to realize any substantial returns.
Where to store your coins
Your choice of where you want to store your coins might depend on the following factors:
- How often do you want to move them?
- The number of coins in your portfolio
- The amount being secured.
For instance, small amounts to be moved regularly are often best stored on a custodial mobile or desktop wallet. Substantial amounts are best stored on a hardware wallet that stores the private keys entirely offline.
With those points in mind, here are some apps and devices where you can store your coins.
Hardware Wallet
Desktop
Mobile
Pros & Cons of Penny Coins
Pros
- They often have a higher upside than other large-cap cryptocurrencies.
- These are better account units than fractions, as with Bitcoin (e.g., 0002 BTC).
- They provide an excellent option for investors to diversify their portfolios.
- Penny coins with support for staking are ideal passive income sources.
Cons
- Penny cryptocurrencies are more volatile and risky investment assets.
- The underlying networks are usually more prone to hacks and other technical mishaps as they’re not as robust and secure as top projects like Bitcoin and Ethereum.
- Users might end up holding worthless tokens if they mistakenly invest in a fake project, and the team disappears.
Investment tips
While you’re shopping for penny cryptocurrencies, keep the following tips and suggestions in mind:
- Do not buy coins merely because an influencer promotes them on social media or YouTube. A majority of these individuals receive compensation for promoting those coins and are often biased in their review of how well the assets can perform.
- If a coin is being heavily promoted on social media as having yielded incredible returns in the past few days or weeks, then it is probably a red flag that you shouldn’t invest in them. Once the hype fades, such coins usually drop sharply and might take a long time to recover (if they ever will).
- If you find a promising penny cryptocurrency, it might be best to dollar-cost average your purchases instead of buying them all at once. By buying consistently at different price levels, you can get a lower buy-in price and profit as soon as there’s any real upward price action.
- Penny coins are highly volatile. Hence, only invest an amount you can afford to lose and do not use funds you will need in the short term.
- Resist the urge to sell off your position in a coin merely because it hasn’t performed in the short term. This urge might get even worse, especially when it seems every other coin is soaring except the one in your portfolio. As long as you’ve done the requisite research and confirmed the coin’s potential before buying, patience might be all you need to get the desired results.
Conclusion
This article provided a clear overview of penny cryptocurrencies, including the most popular ones, where to buy and store them, and the risks and rewards associated with holding these assets.
When done right, one can generate massive returns from investing in penny cryptocurrencies. On the other hand, failing to do adequate research and merely investing because of people’s recommendations can result in severe losses.
If you choose to own penny cryptos, carefully evaluate your risk appetite, research, and pick your coins wisely. Hold them for as long as you can, and you probably might be rewarded in the end for making the right call.
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