In recent years, the crypto market has attracted a lot of attention, with headlines about its highs and lows, severe volatility, and high value or returns. As a neophyte in crypto investment, you’ve certainly asked questions like: What crypto should I invest in? What are the ways for me to get started with my investment? What are the things to consider before investing? What is the rate of return on investment? Is investing in cryptocurrencies a smart idea?
From the recent survey of CoinMarketCap, there are about 7,812 cryptocurrencies and a total estimated market capitalization of $324,716 in 2021. This means that you can have a multitude of investment options and various ways to earn. But which crypto is a smart investment? It is quite challenging to determine which is the most viable since the market is so volatile and no crypto assets are exactly the same.
Difference Between Tokens and Coins
In general, cryptocurrency assets are subdivided into tokens and coins. They are often used synonymously, but they actually mean two different things. Coins are created according to their own blockchain and are intended to be used as a form of currency. Tokens, on the other hand, are built on top of the existing blockchain, enabling the construction and execution of specific smart contracts – the contracts aid in the identification of asset ownership that is not linked to the blockchain network.
Furthermore, other cryptocurrencies are categorized as altcoins, which are blockchain-based but are not classified as bitcoin.
Altcoins: What You Should Know
Several altcoins (also referred to as “alternatives to Bitcoin”) are based on the same underlying structure as Bitcoin and share some of its attributes, although each type is unique from the other. These alternative coins will most certainly create some value in the future, particularly as digital assets become more ubiquitous.
Mining-based altcoins, meme currencies, security tokens, stablecoins, and utility tokens are all examples of altcoins.
Mining-based altcoins are those that are mined and utilize a method called Proof-of-Work (PoW) to construct blocks. In this technology, computers solve difficult issues to generate new coins or currencies. Litecoin, Zcash, and Monero are some examples of mining-based altcoins.
Meme coins are based on a joke or a witty parody of popular cryptocurrencies. They rise to prominence in a brief span of time. The majority of well-known crypto influencers promote them online in the hopes of gaining short-term benefits or profit.
Security coins are like the securities that we commonly trade on stock exchanges. The only distinction is that security tokens have a digital significance. When you purchase a blockchain-enabled version of your stocks or shares, you will receive the same share of profits and equal voting rights that you would have if you buy them through a regular stockbroker.
One of the main objectives of stablecoins is to provide greater stability than any other digital currencies. These are supported by many sources, such as fiat currency, algorithmic functions, etc. Below are the top 10 biggest trading stablecoins, according to nerd wallet.
- Tether ($70.1 billion)
- USD Coin ($32.7 billion)
- Binance USD ($13 billion)
- Dai ($6.5 billion)
- TerraUSD ($2.8 billion)
- TrueUSD ($1.2 billion)
- Pax Dollar ($945.6 million)
- Neutrino USD ($628.5 million)
- Reserve Rights ($499.4 million)
- Fei USD ($428.3 million)
Utility tokens are not classified as money or cash in the same way that coins are, but they do have a definite value. Utility tokens provide numerous benefits in a variety of ways, including rapid access to a new service or product. Filecoin, for example, is a utility currency that is used to pay for network storage space.
What Are the Different Types of Cryptocurrency?
Since there are so many digital currencies with such a range of prices, market capitalization plays a significant role in determining which ones are the most valuable. To help you get started with your investment, here are some of the popular cryptocurrencies that are widely used today.
Bitcoin is the most valuable digital currency in the world, with a market capitalization of approximately $1.17 trillion. It is based on blockchain, which is distributed over hundreds or thousands of computer networks. Bitcoin’s introduction in 2009 transformed money and paved the way for countless developments to its technology.
If you finally decide to invest with Bitcoin, several Bitcoin trading applications are available across the Internet. A trendy example is the Bitcoin Era website.
Ethereum, similar to Bitcoin, is based on the blockchain network but is most widely used as a computing platform. This implies that it can’t support any type of currency; rather, it is used for smart contracts and swift transactions. Ethereum’s market capitalization is estimated at over $520 billion. In just over five years, the price of Ethereum soared from $11 to about $4400.
Tether is an example of stablecoin, which some investors chose as their crypto because they are afraid of the high volatility of other digital assets or coins. For Tether, the market cap is approximately more than $70 billion.
Meanwhile, Dogecoin is a type of altcoin that is built on a blockchain network with a PoW system. The advantage is that there is an unlimited number of coins that can be mined. The market cap is estimated to be greater than $38 billion. Despite being one of the most valuable currencies in terms of market capitalization, the lowest trading price is recorded as 24 cents as of September 10, 2021.
Like Bitcoin, Litecoin also follows blockchain technology. Its unique characteristic involves faster time to process and confirm different kinds of transactions. Its average confirmation time is 2.5 minutes only compared to Bitcoin’s 10 minutes average confirmation time. Thus, it is referred to as the “silver” to the “gold” of Bitcoin.
Cryptocurrency markets are extremely volatile. Before investing, it is critical to gain a thorough understanding of cryptocurrencies and seek advice from qualified financial experts. There is no best crypto asset but what you can do is to diversify your portfolio. In this way, you could gain profits from various crypto combinations.
Have you finally decided on trading or investing in a cryptocurrency? You can start with any of the above-mentioned cryptocurrencies or visit the Bitcoin Superstar beginner-friendly crypto trading platform, which includes all the tools you will need to start your crypto journey.