There are different types of cryptocurrency on the market today. And each of them has its own characteristics. Therefore, traders are left with many options for trading.
Cryptocurrency is a fairly attractive asset that can bring in a lot of money. But to do so, you need to understand the nuances of the market. You also need to know all types of cryptocurrencies, understand their features, strengths and weaknesses.
In this article, we will look at the varieties of these assets. You will learn the types of cryptocurrencies and their differences. This will help you make decisions about specific investments.
What other cryptocurrencies exist?
Let’s look at what types of cryptocurrencies are available. These digital assets can be divided into the following groups:
1️⃣ Bitcoin – the first cryptocurrency, a recognised industry leader
2️⃣ Altcoins – coins issued after BTC
3️⃣ Stablecoins – coins tied to a currency or commodity
4️⃣ Defi – decentralised tokens
5️⃣ Meme cryptocurrencies – assets with ambiguous attitudes
6️⃣ NFT – unique tokens for digital collections
7️⃣ ICO – tokens for initial coin issuance
All other types of cryptocurrency have emerged over time. But the first such asset was bitcoin (BTC). It appeared on the market in 2009 and is still the recognised leader among digital assets.
BTC was the first payment service that allowed transactions to be made without intermediaries. No banks or other financial institutions are required for transactions with these coins.
Despite its imperfections, the cryptocurrency continues to hold a multi-year lead. Bitcoin is often used in place of conventional currencies and even gold. The popularity of this coin continues to grow.
Positive aspects of BTC:
- recognition from the cryptocurrency community;
- leadership that has been held for years;
- high level of security;
- appeal in many countries.
- not very fast transaction speed.
All other cryptocurrencies created after BTC are called altcoins. They are alternative coins with their own blockchain. Some of them have similarities to bitcoin. Others are focused on implementing their own technology.
Developers get to create different tools. Such coins can have higher transaction speeds and simplified mining. There are cryptoprojects that allow to work with smart contracts and applications.
The advantages of altcoins include:
- a huge number of coins (Etherium, Lightcoin and many others);
- the possibility of developing their own technologies;
- improvement of bitcoin’s technical weaknesses;
- a wide choice for investment and trading.
- can’t challenge the leader.
These are digital coins that are tied to some tangible asset. For example, the dollar, the euro, gold, oil or something else. Such crypto-assets are also quite popular.
If you look at other types of cryptocurrencies and their exchange rates, the value of these coins changes seriously. This is the case with Bitcoin, Etherium and other altcoins. In the case of Stablecoins, this is not the case.
Such cryptocurrencies are notable for their stability. Of course, price fluctuations occur there as well. But it happens much less often, and the value does not change much. Some experts recommend to keep your savings in such cryptocurrencies.
The most popular coins in this group are Tether and Binance USD. These staplecoins are pegged to the US dollar. But there are also coins whose exchange rates are regulated by issuance or burning.
Among the merits of stabelcoins are:
- low volatility;
- binding to a physical asset (fiat currency, precious metal, commodity);
- suitable for cryptocurrency savings.
- some coins are not backed by anything.
Decentralised finance services (Defi) bring together multiple digital assets and functions. Experts believe that such platforms revitalise the crypto market. These platforms are very popular.
On such services, users can receive various services. And this happens without the involvement of intermediaries. All payments are made on the Defi network, which attracts many people.
One example is the ETHMakerDAO crypto credit project, which becomes an alternative to a bank. Defi-services can solve various tasks. Such platforms use their own units.
- a wide range of platforms and assets;
- the ability to attract a large number of customers;
- payment for services without intermediaries;
- the accuracy and automation of settlements.
- complexity of choice for investments.
The difference between cryptocurrency and ordinary money is the use of blockchain. Such funds are only stored on the internet. Many coins, however, have useful functions.
However, meme assets stand out here. The first such cryptocurrency was Dogicoin. This coin is based on a meme with a dog. Despite the controversial nature of this asset, it is very popular.
Another in-demand crypto meme is Shiba Inu. The creators of this project intend to challenge DOGE in earnest. Such coins react strongly to the news background. Therefore, they are characterised by ups and downs.
The advantages of such assets:
- the lightness and ease of subject matter;
- the realization of the idea of a meme;
- growth in spite of skeptical estimates;
- interest from serious investors is possible.
- lack of useful technology.
These are non-interchangeable tokens that are used to own unique assets. NFTs are used in many projects. The technology is relevant in blockchain games, trading of digital art and other objects. And the NFT token is unique, so it cannot be replaced by anything else.
- proof of ownership;
- expands the possibilities of cryptocurrency;
- integration of the world of art and digital technology;
- possibility of acquiring NFT collections.
- complexity of the technology (for inexperienced users).
It is an initial coin offering through which a project attracts investment. Start-ups or established companies use this method. The issuance and sale of tokens can raise the necessary funds.
Investors are willing to invest in promising projects because they can buy cryptocurrency at a low price. The value of these coins then tends to increase. If invested properly, an investor can make very good money.
Advantages of ICO tokens:
- The option of launching or expanding a business;
- to attract investment without a bank loan;
- the opportunity for high returns (for investors);
- the demand for the direction.
- Danger of investing in an unprofitable project.
What to choose?
What coins to look out for when investing? Which cryptocurrencies would be the most preferred to invest in?
1️⃣ This point falls into the subjective category. Every investor builds his or her own cryptocurrency portfolio. However, we recommend the following approach:
2️⃣ Decide on an investment in the leading cryptocurrencies (BTC, ETH).
3️⃣ Determine your attitude towards high-risk crypto projects.
4️⃣ Choose cryptoprojects that are trustworthy.
5️⃣ Give preference to coins that provide useful features.
6️⃣ Pay attention to cryptocurrencies, which can increase in value significantly.
7️⃣ Determine an investment and trading platform and earning strategy.
Some users prefer to invest in Bitcoin, others choose Etherium, while others are willing to invest in both assets. It is not advisable to bypass these cryptocurrency market leaders.
However, it is worth investing in other coins as well. And you should invest in reliable crypto-assets that have a good track record. Investing in risky projects may be worthwhile, but you need to analyse these assets carefully. It is important that they do not turn out to be “empty”.
Look out for cryptocurrencies that offer clients some useful tools and technology. The demand for such products indicates the prospects for specific cryptocurrencies.
There are serious benefits to be gained by investing in projects with great potential. However, they need to be identified because there are a lot of coins on the market. And new projects are being created all the time. So an investor is faced with a difficult choice.
Be sure to determine the platform that you will use for investment or trading. After that, think about your income strategy. This can be speculative trading, long-term investing and more.
What is cryptocurrency?
Cryptocurrency is digital money that is created using blockchain technology. Such coins exist only on the internet. It is a digital money that is created using blockchain technology.
How many types of cryptocurrency are there?
There are more than 19,000 cryptocurrencies in the world today. According to others, the number could be even higher. There are also different classifications into groups. We suggest dividing these assets into 7 groups: Bitcoin, Altcoin, Stablecoin, Defi, Crypto-memes, NFT and ICO.
What is the best cryptocurrency to invest in?
There is no clear answer to this question. Experts recommend spreading investments between different assets – promising projects, bitcoin and the best altcoins. Stablecoins are more suitable for saving.
What are the benefits and risks of cryptocurrency transactions?
Most of these coins have high volatility, which can make very good money when invested. However, there remains the same danger of losses. Therefore, when investing, you need to understand the market, be able to analyse specific cryptocurrencies and identify trends correctly. These skills come with experience.