Types of Cryptocurrency
There are more than 6,800 cryptocurrencies on the market today. But the best ones for investing are those that have a large market capitalization. Just like when you’re looking at stocks, you can use market capacity (or “market cap”) to consider the total value of an issued crypto coin. The larger the market cap, the more likely it is to be liquid. There’s also a better chance it will stand the test of time. But unlike stocks, cryptocurrency issuers don’t publish financial statements. Therefore, it’s important to use the limited metrics that do exist. There’s no guarantee that any cryptocurrency won’t disappear, no matter how big or popular it is. These assets have no regulated financial or governmental intermediary. When you’re trying to figure out the best cryptocurrency for you to invest in, you should check to see whether it’s available on an exchange. As of late 2021, the top cryptocurrencies by market cap are Bitcoin and Ethereum, followed by Binance Coin, Tether, and Cardano.
Bitcoin
Bitcoin (BTC) kicked off the crypto revolution when it was created in 2009. The original creator remains somewhat of a mystery, but it’s claimed that the founder’s name is Satoshi Nakamoto. As of October 27, 2021, Bitcoin’s market cap was 44% of the market, around $1.1 trillion. Bitcoin 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 wire transfer fees. Bitcoin is finding mainstream acceptance as a method of payment. As an investment, though, its price has seen wild fluctuations. In early 2017, its price crossed $1,000 for the first time, skyrocketing to more than $19,000 toward the end of the year; it then crashed to around $3,000 a year later. By April 2021, Bitcoin had gained momentum again, crossing $64,000 before seeing some price correction. Another price jump happened in October 2021, when the first bitcoin-based exchange-traded fund entered the market.
Ethereum
While Ethereum (ETH) launched in 2015, it was first conceptualized in 2013 by Vitalik Buterin. Ethereum uses blockchain technology, but it’s programmable. Ethereum is designed to be open access and provide a variety of applications. The way Ethereum works makes it possible to do more than handle money. It’s one of the drivers behind “smart contract” technology, which means that various agreements can be securely executed directly between parties. For instance, you could complete a real estate purchase by using Ethereum without the need for an escrow account. For people who believe in blockchain technology for more than financial transactions, Ethereum may be a good long-term investment. That also could be true for those who want to buy something more than a currency, As of October 2021, Ethereum traded at over $4,000 and commanded more than a $460 billion market cap.
Binance Coin
Binance Coin trades with the symbol BNB. It was launched through an initial coin offering in 2017 by the team that just 11 days later launched the Binance crypto exchange. BNB was first launched on the Ethereum network but migrated to its own Binance Chain in April 2019. One of the big benefits of BNB is a 25% discount if you use the cryptocurrency to pay trading fees on Binance.com and Binance DEX exchanges. However, the discount decreases over time. As of October 27, 2021, BNB had a market cap of more than $75 billion and traded for over $450.
Cardano
Launched in 2017, Cardano is a public blockchain platform. Its cryptocurrency is named ADA. Cardano differs from other cryptocurrencies in that it uses a proof-of-stake (PoS) protocol rather than a proof-of-work one. Proof-of-stake protocols use the number of blockchain tokens a user has to append the blockchain rather than the amount of work that has been done. This reduces the incentive to use large amounts of energy to mine or attack the blockchain, causing Cardano and other PoS protocols to be labeled “green coins.” Cardano has a market cap of $64 billion as of October 27, 2021.
Which Cryptocurrency Is Right for You?
For the most part, investing in crypto is like most other asset classes, but there are higher risks that come along with this type of investment. You can start by opening an account with an exchange like Coinbase, Gemini, or Binance, among many others. You can even buy and sell crypto from your brokerage account on trading apps like Robinhood. As with any investment, the best cryptocurrencies to invest in will fit your needs and reflect what you think is likely to happen in the future. Because they are new, cryptocurrencies are still volatile in pricing; there is no assurance of their future viability. As a result, think about how much of your portfolio should be in crypto. Be sure that allocation is in line with your risk profile.
