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Home»Crypto»Types of Crypto: Everything You Need to Know
Crypto

Types of Crypto: Everything You Need to Know

adminBy adminMarch 4, 2023No Comments11 Mins Read
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One of the most impressive things about cryptocurrencies is their insane ability to increase in value by amounts that are unheard of for any other type of asset. There have been years when Bitcoin has gained well over 1,000% in value, which is far beyond what can be expected for anything other than a few key stocks.

The problem is that a coin can also lose a lot of its value overnight as well, which is why it’s important for participating investors to hold multiple types of crypto at a time. Keep reading this crypto guide to learn about different types of crypto and how best to stack your crypto portfolio.

Crypto and Internet Safety

Before we detail some of the top cryptocurrency types out there, we first have to look at how to rank a cryptocurrency’s safety. We learned from the FTX scandal last year that some of the inherent risks of crypto can lead to market crashes of epic proportions.

What you want to be on the lookout for is how centralized a given coin is. FTX’s FTT coin was coined, owned, and backed exclusively by FTX which means that when the platform crumbled, the value of the token was obliterated in the process. Investors in the token literally lost billions of dollars.

The basic idea is that a token that isn’t centralized, like Bitcoin or Ethereum, is much safer than a token with only a few owners and backers.

Inherent Safety Issues

There are unfortunately safety problems that apply to all cryptocurrencies. These include password security issues, the quality of a user’s e-wallet, and huge price swings.

When you do trade in crypto, it’s definitely worth spending a little bit more on an e-wallet service so that you get one with a ton of extra safety features. Also, make sure the wallet you choose has good reviews on sites like Trustpilot. Getting a good VPN on top of that will ensure that you’re about as untouchable as possible in the internet age.

Crypto’s Saving Grace

Some unique qualities of cryptocurrencies also make them safer than all other types of traditional investments save for physical gold. Decentralization protects a coin’s value from world governments’ long fingers.

With crypto, you can send and receive money in a way that can’t be tracked or taxed. In many jurisdictions, you’ll only pay certain taxes on the transaction that turns your crypto back into fiat currency. This also means that policy changes or mistakes won’t sink the value of your investment the way they could if you bought stock or traded in forex.

In most cases, you should be warier of hackers than the government anyway. That is why it’s good to practice cyber hygiene, have a VPN, get a good e-wallet, and try to avoid the dark web if you do have crypto.

Types of Crypto

Once you know how to hold and trade crypto and have your security infrastructure in place, it’s time to start buying and trading crypto. Before you choose the currencies you want for your wallet, you need to think about how you want crypto to fit into your investment strategy.

You can buy crypto and just let it sit for a few years. Historically, this strategy has turned a profit for its users, but they don’t get the benefit from the short-term spikes. They also don’t suffer when those spikes inevitably drop again.

You can also do short-term trades if you feel like you can time the rises and falls. If you are going to do this, you’re going to need to be able to constantly monitor indicators. This is very difficult for people who have full-time jobs where they have to be present for hours each day.

However, trading in multiple types of crypto has a hidden use as well. You can buy and sell daily between different types of crypto based on which ones are performing better on an hourly or daily basis. If one type does a little better in a day, you sell that one off and buy one that is expected to do better later.

Bitcoin (BTC)

Bitcoin is still the king of cryptocurrencies because it was the first one on the scene and was responsible for the rapid onset of cryptocurrency culture. Though it’s the oldest coin, there are still qualities that are unique to Bitcoin and areas where Bitcoin is still unbeaten.

The first thing about Bitcoin is that it will likely be the coin with the highest value out of all available (and safe) currencies, at least for the foreseeable future. You may hear about a new coin that is priced at an insane amount but remember that new coins are likely to be very centralized, and centralization is bad.

The next thing to know about Bitcoin is that the decentralized ledger, the blockchain, that keeps track of it is impossible to mess with. That’s because a detailed copy of the blockchain’s history is kept on every computer that’s ever engaged with it.

Every ten minutes, every node in the network gets checked and updated, which means that no one will ever be able to corrupt or change the information in any devious way.

Another great thing about bitcoin is that it’s one of the few currencies that can be traded through crypto ATMs. ATMs like this resemble regular ATMs on the front end, but behind the scenes, they connect to the crypto exchanges instead of banks. They’re great for getting cash in emergencies or quickly buying a suddenly spiking coin type when you don’t have a computer handy.

Ethereum (ETH)

Ethereum is the “first best” alternative to Bitcoin and the second most popular of the cryptocurrency types. What you should know, however, is that “Ethereum” is actually the exchange’s name, and the currency itself is called “Ether.”

Ether shares many of the same points that make Bitcoin great. It’s widespread, decentralized, and runs on the same incredibly secure blockchain technology.

What sets Ether apart from Bitcoin is that it actually has more applications. Ethereum’s “smart contract” feature allows users to set up conditions to be met before the ether gets transferred. This makes it quite popular for use among program developers.

If you only used Ether and Bitcoin, you could already safely trade up between the two. Both are quite safe from massive overnight price changes simply because of their popularity. If you use this tactic, remember to convert everything back to fiat or a stable coin when you know you’ll spend longer than usual away from watching your indicators.

Cardano (ADA)

Cardano was created by one of Ethereum’s original founders. He broke off from team Ethereum due to disagreements about how Ethereum was developing. With his new team, he designed a cryptocurrency that was more in line with his vision.

A lot of research took place when the team was designing Cardano’s blockchain, which is what makes it one of the most advanced blockchains that exist. Though it’s similar to Ethereum right now, it’s capable of way more than Ethereum. That’s why it appeals to program developers as well and is even seen by some as a replacement for Ethereum.

What makes Cardano great for investors is that it’s safe to hold and still relatively new. Newer currencies tend to be cheaper per token, which makes them ideal for investors who want to hold them for a long time. Where one Bitcoin costs $21,645 at the time of writing, a Cardano (ADA) token only costs $0.36.

Tether (USDT)

Many people in the crypto-verse like to trade between tokens on a daily basis depending on the difference in the currencies’ values. When you do this, you have to have a few hours a day where you can monitor market information and keep up with the news.

This can be tricky to do for long, unbroken periods of time. If you want to take a break, you have to be able to save the value of your investments by converting them all to a stable store of value. Using a stablecoin instead of fiat currency to this end can be far cheaper in terms of conversion commission and taxes.

Tether is one such stablecoin and it works in an interesting way. While currencies like Bitcoin and Ether are essentially backed by security and faith alone, Tether is backed by the US dollar.

Having its value backed up by the dollar makes Tether far more stable than other cryptocurrencies. This type of currency is known as a stablecoin and there are several of them available. Stablecoins don’t owe their safety to the security of their blockchains, but rather to the fact that they’re supported by conventionally accepted, real-world currencies. 

US Dollar Coin (USDC)

Like Tether, USDC is another stablecoin that’s backed up by the US dollar. A U.S.-based organization, Coin Consortium, launched USDC in 2018 subject to standard American regulations. This adds a layer of regulatory protection to the currency, which users won’t get from most other currencies.

Each USDC token is worth one US dollar, which makes it perfect for two applications. A crypto user can send and receive payments without having to worry about market fluctuations decreasing the real value of the money. They can also convert “unstable” currencies into a stablecoin if they want to have an easier time getting real cash from crypto investing.

Binance USD Coin (BUSD)

Binance, one of the most popular crypto exchanges, also has a coin that’s stapled to the US dollar. Binance’s dollar coin, just like Tether and USDC, costs one dollar per coin. What’s unique about the coin is its applications on the Binance exchange.

If you use Binance’s tokens as payment on the exchange (similar to the way bank charges work at normal banks) you get certain discounts. Some investors try not to sweat the small stuff, but small amounts add up to a lot over time.

Binance Coin (BNB)

Binance’s other coin option has its own value that fluctuates independently from the US dollar. At the time of this writing, one BNB would set you back $309.

BNB used to run on the Ethereum blockchain before getting its own. Now users can either use BNB tokens to cover the daily costs of trading on Binance, use it to trade up, or as a long-term holding.

You may be wondering if BNB is a good token to hold when considering that it is to Binance what an FTT token was to FTX. There are some key differences between the two situations.

Firstly, FTX moved to the Bahamas to avoid regulations, whereas Binance has to (largely) abide by US regulations because of their interest in maintaining their stablecoin.

Secondly, Binance doesn’t have a partner firm whose loans they’ve leveraged against their BNB tokens in the same way FTX had with Alameda Holdings. 

In light of the fallout from the FTX scandal, Binance is ramping up its security and accountability methods to stay in the public’s good books.

Other Good Coins

There are hundreds more cryptocurrencies available today, but not all of them are worth investing in. Dogecoin (DOGE) is a great meme coin, and Ripple (XRP) is wonderful for transferring money across borders. Solana (SOL) is capped like Bitcoin, which means its value is only going to trend upward as long as people use digital currencies.

Choose a Good Investing Strategy

Cryptocurrency has made a lot of money for crypto creators and investors. That’s why we went from having only Bitcoin in 2009 to hundreds of different types of crypto today. This variety opens up a world of great opportunities and dangers for investors.

Depending on the cryptocurrency types you choose for your portfolio, you could be a long-term holder. It’s better to choose lower-risk tokens for this style of investing. You could also make short trades and try to make money by buying and selling higher-risk tokens and stable coins.

Whichever strategy you choose, make sure to do a lot of research first. Learn more about the crypto world by checking out the rest of our blog.

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