The Best Coin Investment: Where To Place Your Bets?

With the crypto market booming, many people are wondering which is the best coin to invest in. There are thousands of cryptocurrencies to choose from, each with its own unique features and potential.

Bitcoin, the original cryptocurrency, remains the most popular and valuable, with a market cap of over $1 trillion. Other major coins include Ethereum, Tether, Binance Coin, Cardano, and Dogecoin. These coins offer various benefits, such as smart contract functionality, decentralised applications, and stable value.

When deciding which cryptocurrency to invest in, it's important to consider factors such as historical performance, transaction speed, security, and adoption rate. It's also crucial to remember that investing in cryptocurrency is risky due to its volatile nature, and prices can fluctuate significantly.

Before investing, be sure to do your own research and only invest what you can afford to lose.

Bitcoin's performance and market cap

Bitcoin is the original cryptocurrency, created in 2009 by Satoshi Nakamoto. It runs on a blockchain, or a distributed ledger logging transactions. As of August 2024, the market cap of Bitcoin is around $1.2 trillion, with a Bitcoin dominance of 54.08%. This means that Bitcoin represents more than 45% of the total cryptocurrency market.

Bitcoin's price has skyrocketed as it has become a household name. In May 2016, one bitcoin was worth around $500. As of August 6, 2024, the price of a single bitcoin was around $55,175, representing a growth of 10,935%. As of August 14, 2024, the market cap of Bitcoin is at a level of 1.177 trillion, up from 572.26 billion a year ago. This is a change of 105.6% in one year.

Bitcoin continues to lead the pack of cryptocurrencies in terms of market capitalization, user base, and popularity. Its dominance in the market is a number that many people follow, and it is considered an indicator of market sentiment. When Bitcoin dominance is high, it generally implies that investors are more confident in Bitcoin relative to other cryptocurrencies.

Bitcoin's performance has been impressive, with a significant increase in its price and market cap over the years. It has experienced tremendous growth and has become a household name in the cryptocurrency space.

Ethereum's unique technology

Ethereum is a unique blockchain platform with a wide range of functions and applications. Here are some details about its technology:

Decentralized Applications

Ethereum is a decentralized blockchain with smart contract functionality. It allows anyone to deploy permanent and immutable decentralized applications onto it, which users can interact with. These decentralized applications provide financial instruments that do not rely on intermediaries like banks or brokerages. This enables functions such as borrowing against or lending out cryptocurrency holdings.

Non-Fungible Tokens (NFTs)

Ethereum also allows users to create and exchange non-fungible tokens (NFTs). NFTs are unique digital assets that can be tied to images, sports memorabilia, virtual real estate, and more.

Smart Contracts

Ethereum enables self-executing contracts, or smart contracts. These are agreements between two parties that are coded onto the blockchain. Once the contract conditions are met, it self-executes and delivers Ether to the appropriate party, removing the need for lawyers or intermediaries.

Consensus Mechanism

On 15 September 2022, Ethereum transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism in an upgrade called "the Merge". This reduced Ethereum's energy usage by 99%.

Open-Source Software

Ethereum is open-source software, allowing for a high degree of customization and flexibility.

Transaction Speed

Ethereum processes transactions more quickly than Bitcoin. New blocks are validated on the Ethereum network once every 12 seconds, compared to once every 10 minutes on the Bitcoin network.

Turing-Complete Programming Language

Ethereum's smart contracts are written in high-level programming languages and then compiled down to EVM bytecode. It uses a Turing-complete programming language, which allows for a wide range of applications and increased functionality.

ERC-20 Token Standard

The ERC-20 Token Standard allows for fungible tokens on the Ethereum blockchain. It includes functions such as transferring tokens, checking token balances, and getting the total supply of tokens available.

Gas Fee System

Ethereum uses a gas fee system to calculate the transaction fee, which is paid in Ether. Each operation on the Ethereum Virtual Machine (EVM) has a predetermined gas cost, intended to be roughly proportional to the resources used. This system helps to prevent network congestion and prioritize transactions.

Layer 2 Networks

Ethereum has a large number of Layer 2 networks built on top of its base blockchain, which offer additional functionality and scalability. The "Deneb-Cancun" upgrade in March 2024 lowered the transaction fees on these Layer 2 networks.

Binance Coin's volatility

Volatility is a measure of how quickly and to what extent the price of an asset changes. It is usually calculated in terms of standard deviations in the annual return of an asset over a set period of time. Volatility is often used as a measure of the investment risk associated with an asset.

Binance Coin (BNB) is a form of cryptocurrency that can be used to trade and pay fees on Binance, one of the largest crypto exchanges in the world. It can also be used for payment processing or even booking travel arrangements.

As with other cryptocurrencies, Binance Coin is subject to high market risk and price volatility. In fact, cryptocurrencies are far more volatile than most other asset classes due to their digital nature, low level of regulation, and smaller market size. This higher level of volatility has powered mass interest in cryptocurrency investment, as it has allowed some investors to realise large returns over relatively short periods of time.

Binance has introduced its own volatility index, the BVOL, which measures the expected 30-day implied volatility derived from tradeable crypto option prices. The index is crafted to incorporate the entire spectrum of option strikes in order to accurately capture the market sentiment regarding expected volatility.

Cardano's network size

Cardano (ADA) is a proof-of-stake cryptocurrency created by a team of engineers, mathematicians, and cryptography experts. One of its co-founders, Charles Hoskinson, was also one of the five initial founding members of Ethereum. Cardano's blockchain was created through extensive experimentation and peer-reviewed research, with its researchers having written over 120 papers on blockchain technology.

Cardano's block size has been increased by 10% from 80KB to 88KB, allowing for more transactions to be included in each batch. This increase in block size will also help improve data throughput and scalability, as well as the performance of decentralised applications (DApps) on the blockchain.

The size of the Cardano blockchain is smaller than that of the Bitcoin ledger, as of November 6, 2023. The exact size of the Cardano blockchain is difficult to determine, but it can be estimated using the current chain parameters. The maximum block size is 65536 bytes, with around 21000 blocks per epoch, and each epoch lasting 5 days. This means that the maximum chain size increase per epoch is 1.4155776 GB, or around 100 GB per year.

Cardano's scalability upgrade is part of a series of planned network optimisations for 2022, with the goal of improving speed and network capacity while maintaining security and decentralisation.

Stablecoins' fiat currency pegs

Stablecoins are a type of cryptocurrency that aims to provide an alternative to the high volatility of popular cryptocurrencies, making them more suitable for everyday transactions. Their value is pegged to a fiat currency, such as the US dollar, or another external reference like gold.

Stablecoins are important because they address the problem of volatility in cryptocurrencies, which can make routine transactions like purchases risky for both the buyer and seller. For example, Bitcoin's price rose from under $5,000 in March 2020 to over $63,000 in April 2021, only to plunge by almost 50% over the next two months. Stablecoins, as the name implies, aim to stabilise the value of the cryptocurrency by pegging it to the value of a fiat currency.

Fiat-collateralized stablecoins maintain a reserve of a fiat currency, such as the US dollar, as collateral. These reserves are held by independent custodians and are regularly audited. Tether (USDT) and TrueUSD (TUSD) are popular examples of fiat-collateralized stablecoins.

Stablecoins can also be commodity-backed, where they are pegged to the market value of commodities such as gold, silver, or oil. Tether Gold (XAUt) is one of the most popular commodity-backed tokens, backed by gold reserves held by an unnamed custodian in Switzerland.

Stablecoins are also categorised into three types: fiat-collateralized, crypto-collateralized, and non-collateralized (algorithmic). Fiat-collateralized stablecoins are pegged to a specific asset, such as the US dollar, and the entity behind the stablecoin maintains a reserve of that asset to support its value. Non-collateralized (algorithmic) stablecoins, on the other hand, use software algorithms to automatically adjust the supply of the stablecoin based on demand to maintain a stable price.

Despite their promise of stability, stablecoins have faced challenges and scrutiny. They have been criticised for their lack of transparency and the potential risks they pose to the broader financial system due to their rapid growth. For example, in 2022, the stablecoin TerraUSD (UST) lost its peg to the US dollar, causing its price to plunge and wiping out almost $45 billion in market capitalisation over a week.

In conclusion, stablecoins offer a potential solution to the volatility of cryptocurrencies by pegging their value to fiat currencies or other assets. However, they also come with their own set of risks and regulatory challenges that need to be carefully considered and addressed.

Frequently asked questions