Bitcoin and other cryptocurrencies have seen a surge in popularity over the past year, with new coins and platforms constantly emerging. However, many investors still find the world of cryptocurrency to be a mystery. With so many new coins and companies jumping on the bandwagon, it can be difficult to keep track of what is going on in the world of cryptocurrency.
Meanwhile, big companies have jumped on the bandwagon: Tesla announced earlier this year that consumers could buy vehicles with Bitcoin. Digital payment platforms Square and PayPal, which also own the transfer application Venmo, now also allow customers to use cryptos.
U.S. Rated by their market capitalization in dollars, the world’s largest cryptocurrencies are Bitcoin, Ethereum, Binance Coin, XRP, and Tether, according to CineMarketCap. While it remains to be seen how long this surge in popularity will last, it is clear that cryptocurrencies are here to stay.
With an anonymous birth in 2009, Bitcoin crypto swims as the king of digital currencies. The electronic token relies on blockchain technology for security, which has become one of the most popular buzzwords in recent years. In basic terms, a decentralized ledger system records all transactions done with Bitcoin. That’s opposed to regular government-backed currencies such as US dollars or Euros since central banks control those.
Bitcoin has hit a new high of $63,000 per unit recently, making it an extremely valuable cryptocurrency. Many Bitcoin bulls refer to it as a value accumulation and argue that digital currency is a viable hedge against inflation. It’s also susceptible to wild swings in price, so it might not be the best choice for risk-averse investors. A flash crash occurred shortly after reaching its all-time high this month, dropping roughly 14% in less than an hour.
Part of Bitcoin’s value is based on the fact that there are only 21 million coins that can be made. Not all of these coins are in circulation, and new ones enter the market as computers solve complex puzzles to generate a new “block” tacked onto the end of the existing chain created by other users engaged in the similar activity (a process known as “mining”). This puzzle-solving is rewarded with bitcoins, although the size of each reward given to miners is cut in half every 210,000 blocks added to the chain. These so-called halving events have caused volatility in bitcoin’s price past years.
Ethereum is blockchain-based software that uses its own cryptocurrency, Ether. It is the second largest digital currency by market cap, at around $300 billion.
The software was designed to extend the use of blockchain beyond Wikipedia and into other applications, making it more than just a “cryptocurrency”.
Ether supply is not capped and new tokens are created constantly through mining, like with Bitcoin. According to CoinDesk data, it reached an all-time high value of over $2,500.
The third-largest crypto by market capitalization, with a market value of about $90 billion, is a unique creature. Binance coins are commonly counterfeited on Binance Exchange. Its maximum cap is 200 million tokens, but tokens are frequently destroyed to balance the overall supply and ensure that its value remains constant over time.
The second characteristic of a binance coin is that it can only be exchanged for other cryptocurrencies. Most recently, during the years following the Trump administration, Binance hired Brian Brooks, the acting head of the Comptroller and Auditor General’s Office, to run his U.S. business.
XRP is a digital currency used on the Ripple payment platform. The neat thing about Ripple is that any currency – digital or otherwise – can be exchanged for another, making it possible to pay in Bitcoin to anyone without having Bitcoin. This makes XRP a very fast means of payment.
XRP doesn’t operate on a blockchain like other digital currencies, instead using something called a hash tree. Another thing that sets XRP apart is that there’s a limited supply of 100 billion units total.
Even with its restricted availability, the price per XRP token remains low compared to others; at $3.40 each, according to Syndesk data. Its market capitalization — or value — is just over $60 billion currently.
In December 2020, the Securities and Exchange Commission filed a lawsuit against Ripple, its CEO, and its chairman for allegedly selling unregistered securities worth $1.3 billion. In December, Ripple CEO Bradley Garlinghouse rejected the allegation as an “attempt to smear crypto in general.”
Tether, with a market cap close to $50 billion, is currently ranked fifth among the largest digital currencies.
Tether belongs to a class of cryptocurrencies known as “stable coins” because their value is pegged to that of another asset, in this case, the US dollar. This helps Tether maintain stability compared to other cryptocurrencies whose values can fluctuate wildly. When it was first introduced in 2014 each token was worth $1 USD.
Honorable mention: DogeCoin
Dogecoin was created in 2013 as a joke, based on a popular dog meme going around the internet. Now, only 8 years later, it has accumulated a market value of over $40 billion and is continuing to grow rapidly. Its popularity shot up recently when Elon Musk, CEO of Tesla, posted about Dogecoin on his Twitter multiple times. In fact, this year alone its value increased by 7800%. At one point, it even became the fourth largest cryptocurrency by market cap!
DogeCoin’s value hit an all-time high in mid-April, but there are many coins still circulating. With 129 billion available every year for new mines, the value of each coin remains relatively low compared to Bitcoin.
Javier Niskanen is a crypto investor who is passionate about helping others achieve success. He has a background in computer science and has been involved in the crypto world since early 2017. Javier is excited to see how blockchain technology will change the world for the better.