What Are the Common Types of Cryptocurrencies?
When considering your cryptocurrency options, you've likely seen how lucrative a foray into the world of cryptocurrency can be. There are more success stories than you can shake a stick at. Look at this one man who managed to make a million dollars in two years using crypto.
It's an information-laden topic, and you'll meet plenty of people trying to sell you something when doing your research, but that's where we can help. Read this article and learn about the different types of cryptocurrencies before investing.
Get Started Learning About the Crypto Landscape
Whenever new technologies are developing, we see them in the public eye under specific brands. These brands have become synonymous with their technology. In the case of cryptocurrency, the trajectory has been a little different.
The blockchain technology that cryptocurrency bases itself on is open source.
This means the technology is available to anyone, regardless of intent or purpose. There's no financial barrier to entry, either. All you need is some programming know-how and a plan, and you're already on your way to starting your first cryptocurrency.
What this means for the average person looking to invest in cryptocurrency is that there's a mind-boggling amount to choose from. There are subtle differences in cryptocurrencies, but that's not all. There are also defining factors in the interactions with the supporting blockchain that can be difficult to explain.
The results will speak for themselves, though. Just take one look here.
How Many Cryptocurrencies Are There?
When we say mind-boggling, we aren't exaggerating either. There are well over 10,000 cryptocurrencies in the marketplace today. Most of them aren't suitable investments, but that's the other tricky part.
Regarding the actual value of crypto, the crypto market cap is hovering somewhere around $1 trillion.
You never know which cryptocurrency will take off, but we'll do a deep dive to help you understand their differences before investing.
The Important Difference between a Coin and a Token
The first step on your cryptocurrency journey is knowing two of the most important terms you have to differentiate between. When most people refer to cryptocurrency, they will refer to coins. You'll also hear this mentioned when you hear terms like 'altcoin.'
If you want an easy-to-digest example of why a crypto coin has the moniker of being a coin, think of it like real money. Instead of a coin undergoing minting, as with standard currency, the coin has its unique place on the blockchain. That's the crypto equivalent of the minting process.
The coin exists as a store of value because of its place on the blockchain. It finds use as such during any transfers, exchanges, and trades.
What Makes a Token Unique?
Tokens refer to a place on the blockchain and can be attached to otherwise immaterial or intangible assets to give them value. If you want a perfect example of this in action, look at the latest craze of NFTs.
Turning a piece of artwork into a non-fungible token allows something intangible to have a monetary value. This tokenization finds use across different apps, marketing campaigns, and online stores.
A Closer Look at Types of Cryptocurrencies
Now that you've got a rough idea of how it works and what you're looking at, we can look at some of the specific types of cryptocurrencies available. You've already heard of a few big players in this list, but a few lesser knowns are still as valuable.
Which are the best cryptocurrencies, though?
Since cryptocurrency is most used as a store of value, some of the more prominent players in the game already have a high value. Others have more day-to-day uses, so the price reflects that fact.
We'll also get a good look at the usage of the terms we defined earlier here.
The One That Started It All
It would be odd to start dissecting different cryptocurrencies without first addressing Bitcoin. It's famous, and at times infamous, thanks to fluctuating prices, the coin that started it all.
It has the honor of being the first decentralized currency, all thanks to crypto technology. It revolutionized finance and trading through this technology. Bitcoin kept the supply under control and was able to verify all trades using its built-in ledger.
It set the groundwork for all future cryptocurrencies, putting it forever at the top of almost any list examining the different cryptos. Due to the overwhelming popularity of the coin, it has had its fair share of ups and downs.
An Alternative Based on Contracts
Ethereum is almost as popular as Bitcoin in the cryptocurrency world. This is despite it not quite being a household name amongst non-enthusiasts. Ethereum uses the Ether token to fuel the transactions and trades on its blockchain.
Smart contracts and decentralized applications are the two big selling points you'll see from the Ether crowd. This is where the token part of the arrangement comes in. A token can be attached to specific trades as security tokens or used for things like equity in company shares.
These are just a few reasons it has become one of the most popular cryptocurrencies.
A More Stable Form of Cryptocurrency
The introduction of Tether also brings with it a new term for us to learn. Tether is a stablecoin, which means two things. It functions similarly to Bitcoin, as it's a fully-fledged coin.
Where the stable part comes in is the link to fiat currencies. While it might seem that cryptocurrencies are attempting to get away from the fiat world, it's not always true. In the case of Tether, it offers non-centralized benefits while also keeping a steady and safe value.
Options for Risk Takers and Thrill Seekers
One of the other potential avenues for investment is that of the altcoin. You'll see many crypto traders scoff at these currencies, and there's some good reason. The closest analogy would be penny stocks in traditional investment.
The cost of an altcoin will be meager, an investment where only a few dollars could net you thousands of units. The downside, though, is that the potential to lose the entirety of the investment is enormous.
This is why the more well-known coins receive the most publicity and interest. Since there are far more holders, and the currency may have use outside of being a store of value, they are more likely to maintain their price.
Types of Trading Strategies for Crypto
As opposed to the traditional investment model, cryptocurrency investment is a speculation game. Since many cryptocurrencies have uses outside of pure investing, this idea is more of a sliding scale than a rule.
Still, regardless of its uses, a cryptocurrency will live and die by supply and demand. We'll reference bitcoin here to illustrate how violent the ups and downs can be. While enormous winners were singing Bitcoin's praises on the rise, there were as many broken hearts on the way down.
There are plenty of trading options for the clued-in investor, though. Staking is a common strategy where crypto will be held and utilized in transaction verification on the blockchain. This earns a reward in the form of more cryptocurrency.
There are also futures and options trading for those with a good feel for the cryptocurrency rollercoaster.
Where Should You Get Started?
If you're looking for a single place to do all your crypto tradings, you will be out of luck. There are plenty of large-scale platforms that offer many different options, but none that have it all. You'll have to have multiple accounts and apps to have access to everything you might need.
Many of these platforms and apps aren't as comprehensive as a broker might be, which is one of their most significant downsides. There's also the fact of limited access to specific cryptocurrencies. That means you might miss out on the newest developments, of which there are many.
One option is to enlist help to manage your cryptocurrency portfolio. That way, you mitigate many of the issues we've already mentioned. You'll have expert advice to guide you on potential dips in the market and someone to keep you abreast of new investment opportunities.
Begin Your Journey the Right Way
As you can tell from how many different types of cryptocurrencies there are, there's no one-size-fits-all answer to investment. While there are many sound options for investment, the cryptocurrency world is volatile and prone to changes.
That's why it's best to consider the services of cryptocurrency experts. This goes double if you want to grow your portfolio without unnecessary risk.
TrueCode Capital has worked in the crypto space for years and has built up a wealth of experience in preserving client investments. Contact us if interested in joining one of the fastest wealth-growing opportunities.
Learn More: Take the crypto quiz
Take a three-minute quiz to learn how to become a more confident crypto investor.
When you take the quiz, you'll get a 15-page PDF report summarizing your qualifications:
- Do I understand my wealth objectives?
- Do I have the knowledge to confidently invest in crypto?
- What is the impact of crypto investing in my portfolio?
Last updated June 1, 2022
The information provided by TrueCode Capital ("we," "us," or "our") on https://www.truecodecapital.com (the "Site") is for general informational purposes only. All information on the Site is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. UNDER NO CIRCUMSTANCE SHALL WE HAVE ANY LIABILITY TO YOU FOR ANY LOSS OR DAMAGE OF ANY KIND INCURRED AS A RESULT OF THE USE OF THE SITE OR RELIANCE ON ANY INFORMATION PROVIDED ON THE SITE. YOUR USE OF THE SITE AND YOUR RELIANCE ON ANY INFORMATION ON THE SITE IS SOLELY AT YOUR OWN RISK.
The Site cannot and does not contain financial advice. The financial information is provided for general informational and educational purposes only and is not a substitute for professional advice. Accordingly, before taking any actions based upon such information, we encourage you to consult with the appropriate professionals. We do not provide any kind of financial advice. THE USE OR RELIANCE OF ANY INFORMATION CONTAINED ON THE SITE IS SOLELY AT YOUR OWN RISK.
Learn about our Fund Performance
We strive to create asymmetric growth opportunities by leveraging the latest in machine learning, financial engineering, and risk management methodologies.