Top 5 Types Of Cryptocurrency

December 10, 2020

The market for cryptocurrencies is large, particularly considering how new the asset class is as a whole. As a result, if you are considering investing in them, choosing which cryptocurrency to purchase can be an overwhelming prospect. 

Here, we list what the top types of cryptocurrency currently are to help with your final decision. First, we outline what exactly a cryptocurrency is so that you can help make a better final decision as to which is better for your investment strategy overall. 

What is cryptocurrency?

A cryptocurrency is a digital form of currency. Its security comes in the form of cryptography which is what makes each fraction of a cryptocurrency almost impossible to fake. Ensuring that counterfeits are not rife within the crypto world is vital to its legitimacy and making certain that it is an investable asset class. 

Cryptocurrencies are not issued by central banks or governments. Instead, they make use of blockchain technology. Blockchain technology is the ledger that lists all cryptocurrencies sold which are spread over a network of computers around the world.

Top Types Of Cryptocurrency

Bitcoin

Bitcoin was the first cryptocurrency created. It is by far the most valuable cryptocurrency available as well as the most popular. It was first established in 2009 and is perhaps the ultimate market disrupter given cryptocurrency’s potential to change how many of us do business. It is popular thanks to its highly transparent peer to peer trading technique, though all transactions remain anonymous. 

Symbol: BTC, Market Cap $243,500,000,000. 

Ethereum

Ethereum was created in 2015 yet it has one of the largest market caps in the cryptocurrency world. Its popularity is down to its efficiency which means that it can be traded 24/7 as well as be relied upon to be counterfeit free. Ether, the individual tokens that Ethereum trades, can be used to buy other digital currencies that are traded within the Ethereum platform. 

Symbol: ETH, Market Cap $44,400,000,000

Tether

Tether is part of a group of cryptocurrencies called stablecoins. The name comes from creating a cryptocurrency that is tied to a traditional currency or other traditional asset class like gold. The target for Tether and other stablecoins is to minimise volatility which can be rife in the crypto market. As a result, more cautious investors may be attracted to this cryptocurrency as well as investors who want to be able to carry out trades with traditional currency too. 

Symbol: USDT, Market Cap $16,400,000,000. 

XRP

XRP is also known as Ripple and it is popular thanks to its quick and easy way to transfer funds. It also has very low fees attached to its trades which allow users to exchange many different types of traditional currency too. For example, buyers can exchange USD to EUR if needed. For this reason, it is often used for much bigger trades and large amounts of money as opposed to users of Bitcoin who want smaller peer to peer transactions. 

Symbol: XRP, Market Cap $11,300,000,000. 

Bitcoin Cash

While Bitcoin remains the largest cryptocurrency at present, given that it was the first, it was not without its disadvantages. Bitcoin Cash was created in an effort to smooth out those problems and glitches. For example, Bitcoin Cash allows for larger amounts or sets of Bitcoin to be traded. The result is a quicker transaction time. 

Symbol: BCH, Market Cap $4,800,000,000 

Top Cryptocurrencies - key takeaways

There is no getting away from the fact that cryptocurrencies, like many an asset class, are complicated. It therefore pays to do extensive due diligence on them before carrying out any transactions. By ensuring that you choose the right cryptocurrency for you, you can help mitigate any risks that you may otherwise encounter. In doing so, you will be able to minimise any potential losses and maximise your returns. 

Rachel Lee
Having worked at Morgan Stanley and BNYMellon for over 10 years in pensions and investments, Rachel now works as a full-time business and financial writer.

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