Are you new to cryptocurrencies? Five things to consider before investing (Part 1)
The cryptocurrency industry has seen a large number of new investors in the last six months. For some it was the earnings of BTC and Ether that drew them in, for others it was the possibilities in DeFi and yet for others it was Elon Musk and many other celebrities who broke into the industry. However, for beginners, getting started is never easy. Many end up investing in scams, losing their private keys, transferring cryptocurrencies to the wrong addresses, being influenced by social media campaigns, and more.
Here at Crypto report, we have compiled a five-part series to help newbies get started with cryptocurrencies. For those who have been in crypto for years, it is also a good time to update your knowledge and remember the basics. In Part 1, we look at the five most common investments in crypto, their merits, and what to watch out for:
Bitcoin (BTC)
Bitcoin (BTC) is one of the most popular cryptocurrencies on the market. In addition to being the first open source digital currency, it is the largest in the world. Having proven it to work for over a decade, most first-time investors chose to start out as a safe bet. However, its value goes further.
For starters, it has proven to be a store of value. While the US dollar has lost its purchasing power due to rising inflation, BTC has gained enormously. In 2011, one BTC was worth $ 0.30. In the last decade, the digital asset has recovered to reach $ 64,000. It's worth noting that, in the middle, it rose as high as $ 20K before consequently collapsing as low as $ 3K. As a store of value, BTC has outperformed most traditional assets, including gold. For most institutional investors, this has been the main attraction of the digital currency.
BTC, being the most popular cryptocurrency, also offers the most liquidity of any token. This means that there are suitable buyers and sellers on the exchanges. In fact, Tesla recently dumped over $ 200 million worth of BTC to prove that BTC is liquid. Furthermore, the digital currency has seen great business adoption. After years of persistent growth, there are now thousands of companies that accept BTC as a form of payment, including Tesla.
Ethereum (ETH)
Ethereum is the second largest cryptocurrency by market capitalization and, unlike BTC, whose creator is unknown, this was the brainchild of Vitalik Buterin. The Ethereum project is an open source blockchain with smart contract functionality. This has seen a lot of adoption as traditional infrastructure is replaced by advanced smart contracts. With its practically infinite application, most crypto projects are based on the Ethereum blockchain, providing smart solutions in traditional industries. ETH allows these projects to run on the blockchain, gaining value with increasing demand.
Unfortunately, its growth in recent years has resulted in high transaction fees and slow transaction speeds. The developers are interested in updating the blockchain with the launch of ETH 2.0 later this year. Ethereum also enjoys high liquidity and is available on most crypto exchanges.
Ethereum killers
In the rise of Ethereum, various blockchains saw opportunities to improve on what Ethereum created. These have come to be known as 'Ethereum killers' as some have seen mass adoption that market watchers have suggested will overtake Ethereum in adoption.
The most popular are Cardano and Polkadot. Its native coins, in this case ADA and DOT respectively, which power the blockchain, get massive value as projects grow. More recently, the industry has seen the emergence of Binance Smart Chain with its native token (BNB) and Solana (SOL).
DeFi
Decentralized Finance (DeFi) is a relatively new market born of smart contracts. DeFi projects bring a traditional banking approach to the crypto space. These are loans, loans and bets with cryptocurrencies. Clients can deposit tokens in smart contracts from which they can earn interest. Through it, users can also borrow cryptocurrencies to exchange or finance projects.
This practice has become so popular and projects based on it have gained a lot of traction. In fact, they now make up a considerable number of the top 25 tokens by market capitalization. Among the most popular are UniSwap (UNI), PancakeSwap (CAKE), and SushiSwap (SUSHI).
Money makers / Money makers
Every now and then some cryptocurrencies are all the rage. This could simply be because it is an exciting new blockchain, an existing blockchain that is undergoing extensive development possibly improving its adoption, or simply because an influencer supports it. The most recent to follow a trend is Dogecoin (DOGE). Since Elon Musk, the second richest person to come out in support of the meme coin, has posted massive gains.
In some cases, like DOGE, the inherent blockchain has little value. However, the demand for the currency continues to drive prices up. In others like Ethereum, value is driven by the blockchain and / or its development.
"Money generators" are popular with day traders as they can make money quickly before the bubble bursts. For long-term traders, they are the riskiest type of investment.
