Faith Morrow
With the crypto market's extreme volatility, investing in cryptocurrencies is not for the faint of heart. The crypto market has witnessed violent swings, with its value soaring to $2.9 trillion in November 2021 and then dipping below $900 billion in mid-2022. As of June 2024, the crypto market was valued at over $2.5 trillion.
Bitcoin and Ethereum are the two best cryptocurrencies to buy, sitting in a league of their own. Bitcoin, the oldest and most popular crypto token, is the first cryptocurrency and the largest by market capitalization, with a valuation of about $1.3 trillion. It has gained mainstream acceptance, with businesses such as Visa and Stripe accepting bitcoin as payment. Ethereum, the second-largest cryptocurrency, is a favourite of program developers due to its potential applications, such as smart contracts and non-fungible tokens (NFTs).
Other cryptocurrencies worth considering include Binance Coin (BNB), Cardano (ADA), Solana (SOL), Dogecoin, and Tether (USDT). However, it is important to remember that investing in cryptocurrencies is risky, and one should carefully evaluate the risks and do thorough research before investing.
| Characteristics | Values |
|---|---|
| Age | The older the cryptocurrency, the more data there is to analyse its performance over time. |
| Market Capitalization | The market capitalization of a cryptocurrency is an important indicator of its value and popularity. |
| Year-over-year return | This metric shows the percentage change in the value of a cryptocurrency over the past year. |
| Technology | The underlying technology of a cryptocurrency can impact its efficiency, security, and environmental impact. |
| Acceptance | The wider the acceptance of a cryptocurrency, the more likely it is to be a stable investment. |
| Regulatory Issues | Cryptocurrencies with regulatory issues may be riskier investments. |
| Transaction Speed | Faster transaction speeds improve the user experience and make the cryptocurrency more attractive. |
| Transaction Fees | Lower transaction fees make a cryptocurrency more affordable and competitive. |
| Community | An active and dedicated community can drive the success and popularity of a cryptocurrency. |
| Volatility | Cryptocurrencies are known for their high volatility, and some are more stable than others. |
| Risk | The level of risk associated with investing in a particular cryptocurrency depends on various factors, including its age, acceptance, and regulatory issues. |
What You'll Learn
Bitcoin vs. Ethereum
Bitcoin and Ethereum are the two leading cryptocurrencies in the market, with a combined market cap of about 70% of the entire global cryptocurrency market.
Bitcoin was launched in 2009 and was the first cryptocurrency. It is a blockchain-based, decentralized digital currency that allows peer-to-peer transactions without the need for intermediaries like banks. Bitcoin's value rests on its status as the first cryptocurrency and as an alternative to fiat currency. It has a finite supply capped at 21 million, and its mining process is energy-intensive.
Ethereum, on the other hand, was launched in 2015 and is a decentralized computing platform that enables the creation and deployment of smart contracts and decentralized applications (dApps). It is often referred to as "digital silver" due to its versatility. Ethereum's native cryptocurrency is Ether, which is traded as a digital currency, held as an investment, used to purchase goods and services, and used to pay transaction fees on the Ethereum network. Ethereum has transitioned to a Proof-of-Stake (PoS) consensus mechanism, which is more energy-efficient and less resource-intensive than Bitcoin's Proof-of-Work (PoW) mechanism.
When comparing the two, it's important to note that they were designed for different purposes. Bitcoin was created primarily as a decentralized digital currency, while Ethereum was developed as a versatile platform to support smart contracts, dApps, and its native cryptocurrency, Ether.
In terms of investment, both Bitcoin and Ethereum have experienced significant price fluctuations and growth, and it's difficult to predict which will perform better in the future. Bitcoin has seen greater acceptance by traditional finance, with the approval of spot Bitcoin ETFs by major financial institutions. Ethereum, on the other hand, has better technology and provides more uses, but it may have more potential for long-term growth.
The decision to invest in Bitcoin or Ethereum depends on your market outlook, risk tolerance, and investment goals. Both have their unique advantages and serve different purposes in the digital landscape.
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Binance Coin pros and cons
Binance Coin (BNB) is a cryptocurrency that runs on the Ethereum blockchain with ERC-20 standard and a limited supply of a maximum of 200 million BNB tokens. Here are some pros and cons of investing in BNB.
Pros:
- BNB is one of the best utility tokens in the industry and can be used beyond the Binance ecosystem for payment methods across different services, including credit crypto card bills, online purchases, travel, entertainment, and transfers.
- BNB uses a unique burndown policy. Binance will use 20% of their profits to buy back and burn BNB tokens to reduce the total supply until 100 million coins remain, or 50% of the total supply. This deflationary method may lead to increased prices over time, which can help investors make price speculations.
- BNB acts as a discount coupon. Binance users receive a discount when paying fees on the exchange, creating an incentive for users and facilitating operations for traders who perform daily transactions.
- The Binance exchange is highly popular. During the 2021 bull run, BNB was the third-largest coin until Tether pushed past. Binance is a high-growth company and the largest crypto exchange with the most cryptocurrency pairs available.
- Binance offers fast transactions and some of the lowest transaction fees in the industry - a fee of 0.1% for all traders.
- The Binance Smart Chain could beat Ethereum. Launched in September 2020, the BSC didn't gain much attention until February 2021, when Ethereum transaction fees began to soar. The BSC has the second-largest DeFi ecosystem and is more stable and cheaper to use than Ethereum.
Cons:
- Binance Coin is heavily centralized. Binance has immense control over the coin, and up to 80% of BNB tokens are owned by Binance in several wallets, allowing them to have majority control over validators on the network.
- Regulators around the world want to take Binance down. Binance has faced regulatory issues in several countries, including the UK, Thailand, Japan, Canada, Germany, and Malta.
- Binance is a major target for cyber-attacks. In May 2019, an attack led to the loss of around 7,000 BTC (equivalent to $40 million at the time).
- Binance is operating a CeFi exchange in a DeFi world. As decentralized lending and trading protocols continue to grow, Binance's position may become precarious.
- Heavy competition with other smart contract cryptos. The success of the Binance Smart Chain may be threatened by Ethereum 2.0 and Cardano, which is close to launching its smart contracts.
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Cardano's future
Cardano is a decentralised blockchain project designed as an open-source platform to support peer-to-peer transactions. Its structured architecture allows for smart contracts, ensuring adaptability and scalability while maintaining robust security measures.
Cardano's price history has been volatile, resembling the path of a rollercoaster with soaring peaks and challenging troughs. It was founded in 2014 and officially launched its native token, ADA, in 2017, with an initial price of $0.0024. Since then, it has experienced a meteoric rise, with its market cap touching an impressive $94.9 billion. However, it has also faced downward shifts and has struggled to gain significant adoption.
Looking ahead, Cardano's future is uncertain. On the one hand, it is alive with activity, boasting a large number of projects launched and in development. It has a strong reputation as an OG cryptocurrency project, and its focus on development education, innovative infrastructure, and multi-chain solutions set an ambitious tone for its future roadmap. Additionally, its status as a decentralised blockchain with robust security measures and scalability makes it an attractive investment option.
On the other hand, Cardano faces challenges in gaining widespread adoption, with competitors like Ethereum, Solana, and TON gaining more traction. Its ecosystem is heavily reliant on its native token, and user engagement and trading volumes remain moderate. To truly flourish, intensified operational efforts are needed.
In terms of price predictions, Cardano could reach $11.43 by 2040 and $65.39 by 2050, with its market cap potentially surpassing $30 billion. Short-term predictions estimate that it could reach a new all-time high of $3.19 by December 2024, a 280% increase from current levels.
In conclusion, Cardano's future will depend on its ability to successfully implement its roadmap goals, particularly in challenging Ethereum's dominance in smart contracts and dApps. While it offers an attractive set of features, including strong decentralisation, security, and scalability, it needs to work on gaining wider adoption and intensifying its operational efforts.
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Stablecoins
- Fiat-collateralized stablecoins: These are pegged to a specific fiat currency, such as the US dollar, and are backed by reserves of that currency held by independent custodians. Tether (USDT) and TrueUSD (TUSD) are examples of this type of stablecoin.
- Crypto-collateralized stablecoins: These are backed by other cryptocurrencies, with the value of the reserve cryptocurrency typically exceeding the value of the stablecoins issued to protect against volatility. MakerDAO's Dai (DAI) is an example of a crypto-backed stablecoin, as it is pegged to the US dollar but backed by Ethereum and other cryptocurrencies.
- Algorithmic stablecoins (also known as non-collateralized or seigniorage-style stablecoins): These stablecoins use algorithms to control the supply of the coin and maintain price stability. They do not rely on reserve assets but instead use computer programs to adjust the supply based on demand. TerraUSD (UST) was an algorithmic stablecoin that was designed to maintain a 1:1 peg with the US dollar but ultimately failed to do so.
Overall, stablecoins offer a potentially less volatile option for investors looking to enter the cryptocurrency market. However, it is important to carefully research and understand the risks associated with this emerging asset class.
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Meme coins
However, it is important to note that the vast majority of meme coins will likely be defunct in a few years or months, and they are mostly for holding or sharing for entertainment value. Due to their volatile nature, meme coins are not accepted by many popular centralised exchanges like Kraken, Robinhood, or Coinbase, and they are usually only available for trading or swapping on decentralised exchanges.
If you are considering investing in meme coins, it is important to carefully weigh the risks and do thorough research.
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Frequently asked questions
The value of bitcoin tends to fluctuate a lot. You may see the price go up or down thousands of dollars during any month. That certainly was true in 2022, as bitcoin prices correlated to the Nasdaq. This challenged previous assumptions that bitcoin would serve as a hedge against inflation.
The Ethereum platform currently only has one "lane" for transactions. This can lead to transactions taking longer to process when the network is overloaded. Transaction fees are also high and won't go down until Ethereum implements "danksharding", which will require several upgrades.
BNB's position as the native cryptocurrency on the world's largest exchange, Binance, "legitimizes" it in some respects. But it also makes the currency especially vulnerable to regulatory issues.
Cardano may not be able to compete with larger cryptocurrencies, which could result in fewer adopters and, therefore, fewer developers. This isn't appealing to most investors, who want to see a high adoption rate.
