Types of Cryptocurrencies
There are over 6,800 cryptocurrencies in the market today. However, the best coins to invest in are those with a large market capitalization. You can use market cap (or “market capitalization”) to hold a total value of a issued cryptocurrency.
The larger the market cap, the greater the opportunity that it will be liquid. There is also a better chance that it will stand the test of time. But unlike stocks, cryptocurrency issuers do not publish financial data. Therefore, it’s important to use the limited metrics available.
There is no guarantee that any cryptocurrency won’t disappear, regardless of its size or fame. These assets do not have a financial or governmental regulatory intermediary. When trying to determine the best cryptocurrencies to invest in, you should check their trading availability.
Bitcoin
Bitcoin (BTC) started the cryptocurrency revolution when it was created in 2009. Its creator remains a subject of mystery, but it is alleged that the founder’s name is Satoshi Nakamoto. By October 27, 2021, Bitcoin’s market cap accounted for 44% of the market, approximately $1.1 trillion.
Bitcoin uses blockchain technology, enabling peer-to-peer transactions via a central digital ledger. This means that there is no need for a third party to verify information or work as a settlement center.
Bitcoin has made it possible for people around the world to send money to each other almost instantly. There’s no need to worry about exchange rates or bank transfer fees.
Bitcoin finds major acceptance as a means of payment. As an investment, however, its price has undergone massive fluctuations. In early 2017, its price surpassed $1,000 for the first time, rising to over $19,000 toward the end of the year, then crashing to around $3,000 a year later.
By April 2021, Bitcoin gained momentum again, surpassing $64,000 before witnessing some price correction. Another price surge occurred in October 2021 when a Bitcoin-based exchange-traded fund (ETF) entered the market.
Ethereum
While Ethereum (ETH) was launched in 2015, it was first envisioned in 2013 by Vitalik Buterin. Ethereum uses blockchain technology but is programmable. Ethereum is designed to be open access and provides a variety of applications.
How Ethereum works allows for more than just dealing with money. It is one of the drivers behind “smart contract” technology, meaning that various agreements can be executed securely directly between parties. For example, you can complete a property purchase using Ethereum without needing an escrow agent.
For those who believe in blockchain technology for more than just financial transactions, Ethereum could be a good long-term investment. This may also be true for those looking to purchase something more than just a currency,
By October 2021, Ethereum was trading over $4,000 and had a market cap exceeding $460 billion.
Binance Coin
Binance Coin trades under the symbol BNB. It was launched via an initial coin offering (ICO) in 2017 by the team that launched the Binance cryptocurrency exchange just 11 days later. BNB was initially launched on the Ethereum network but was transferred to its own Binance Chain in April 2019.
It is considered
The main features of BNB are a 25% discount if you use the cryptocurrency to pay trading fees on the exchanges Binance.com and Binance DEX. However, the discount decreases over time. As of October 27, 2021, Binance Coin had a market capitalization of over $75 billion and was trading at over $450.
Cardano
Cardano was launched in 2017 as a public blockchain platform. Its cryptocurrency is called ADA. Cardano differs from other cryptocurrencies in that it uses a Proof-of-Stake (PoS) protocol instead of a Proof-of-Work (PoW) protocol. Proof-of-Stake protocols use the number of tokens staked on the blockchain to add blocks rather than the amount of work done.
This reduces the incentive to use large amounts of energy for mining or attacking the blockchain, making Cardano and other Proof-of-Stake protocols called “green currencies.” Cardano had a market capitalization of $64 billion by October 27, 2021.
Which cryptocurrency is right for you?
Generally, investing in cryptocurrencies is like investing in other asset classes, but there are higher risks associated with this type of investment.
Here are some questions to help determine which cryptocurrency is suitable for you:
– What are the risks associated with investing in cryptocurrencies?
– Can you become wealthy by investing in cryptocurrencies?
– How can you start investing in cryptocurrencies?
– What other cryptocurrencies can you invest in?
You should consider your own needs and reflect on what you believe is likely to happen in the future when determining the best cryptocurrencies to invest in. Due to their novelty, cryptocurrencies are still volatile in pricing, and there is no guarantee of their future.
As such, think about how much cryptocurrencies should make up your portfolio. Ensure that this percentage aligns with your risk profile.
Frequently Asked Questions (FAQs)
What are the risks associated with investing in cryptocurrencies?
Cryptocurrencies are a relatively new form of investment and have grown rapidly since their emergence in 2009. The rapid failures of some of these cryptocurrencies should give any investor reason to be cautious. Cryptocurrencies are not recognized to the same extent as other securities, and much of the trading occurs offshore, increasing risks. You should only invest in cryptocurrencies after understanding the risks and ensuring there are safer investments to mitigate those risks.
Can you become wealthy by investing in cryptocurrencies?
There is a double-edged sword in cryptocurrency investing, which is the potential for very high returns. If you had invested $1,000 in Bitcoin a decade ago, for example, you would be a millionaire today. However, it is always difficult to predict which coins will explode and which will crash. That is why it is important to maintain a level head and use a balanced investment strategy.
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Sources: CoinMarketCap, “Daily Cryptocurrency Prices by Market Capitalization,” ProShares. “ProShares Bitcoin Strategy ETF (BITO),” Ethereum.org. “Ethereum White Paper,” CoinMarketCap. “Ethereum,” Binance. “BNB Evolution: From Fees to Global DeFi Infrastructure,” CoinMarketCap. “Binance Coin,” CoinMarketCap. “Cardano,” U.S. Securities and Exchange Commission. “Statement on Cryptocurrencies and Initial Coin Offerings.”
Source: https://www.thebalancemoney.com/best-cryptocurrency-to-invest-in-5079977
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