MHC Digital Finance - March 23, 2021
After a remarkable 2020, 2021 is shaping up to be a stellar year for cryptocurrencies. But with literally thousands to choose from, how do you know which ones are worth paying attention to?
2020 was the year that bitcoin and cryptocurrency crossed the Rubicon, finally becoming a mainstream financial asset. With growing institutional interest also comes increasing retail interest in cryptos. But with almost 9,000 cryptocurrencies available according to industry site CoinMarketCap, which ones should retail investors look at?
Generally speaking, the smaller a project, the more risky it is and the more prone to high volatility. Below you’ll find the top 30 coins by market cap (the total value of all coins in existence) and the brief rundown of why they’re significant.
1. Bitcoin (BTC)
The first, largest and most popular cryptocurrency, Bitcoin is also the one that institutions are taking most interest in. Additionally, where bitcoin goes, altcoins ultimately tend to follow – so an uptrend or downtrend for BTC is well worth watching.
2. Ethereum (ETH)
The second-largest crypto and the primary blockchain for decentralised finance (DeFi) applications. Ethereum’s network effect and popularity mean it hasn’t yet been unseated as the kind of DeFi, despite eye-watering transaction fees.
3. Binance Coin (BNB)
The native coin of Binance Chain, the blockchain launched by the largest crypto exchange in the world. Regular buybacks of BNB fuelled by Binance’s colossal income from trading fees indicate Binance’s view of the value of their own token.
4. Tether (USDT)
The original stablecoin, backed by fiat reserves and very popular as a proxy for the dollar among traders. However, Tether has proven a controversial company, and there has long been skepticism about whether USDT really is 100% backed.
5. Cardano (ADA)
A major smart contracts platform launched by an Ethereum co-founder. Cardano has attracted huge attention in the space for its methodical and academic approach to development, and its ambitious roadmap.
6. Polkadot (DOT)
A protocol that allows tokens and data to be transferred across different blockchains, which are usually siloed and self-contained. Interoperability is a massively important theme, which is why getting it right has brought DOT so much attention.
7. Ripple (XRP)
One of the oldest cryptos, XRP is designed to take on the inefficient global financial banking system with fast, low-cost transfers. A number of banks now use Ripple’s technology and XRP has an enthusiastic trading community.
8. Litecoin (LTC)
Pitched as the ‘silver to bitcoin’s digital gold’, Litecoin is another early crypto and offers fast, low-cost transactions. It is one of the most liquid and popular cryptocurrencies, widely supported by exchanges.
9. Chainlink (LINK)
Chainlink is an oracle network: a system that securely feeds real-world data to the blockchain for use in DeFi applications. Oracles are absolutely critical to the DeFi sector, so projects like LINK have gained a lot of interest.
10. Bitcoin Cash (BCH)
A “fork” or copy of Bitcoin created in 2017 when a group tried to take control of the Bitcoin network. Up to the date of the split, all transactions on the Bitcoin Cash blockchain are the same as Bitcoin’s. Afterwards, the two ledgers diverged. BCH is worth only a tiny fraction of BTC.
11. Stellar (XLM)
The Stellar network aims to achieve a similar goal to Ripple – fast international transfers – but for regular users instead of banks and financial organisations. It has seen rapid adoption over the last year.
12. USD Coin (USDC)
A regulated, dollar-backed stablecoin issued by Coinbase and Circle. USDC is gaining market share because it offers the same functionality as USDT with greater transparency and compliance.
13. Uniswap (UNI)
The governance token for the hugely popular decentralised exchange, Uniswap – one of the largest DeFi initiatives. Uniswap isn’t going out of fashion any time soon, and neither will its token.
14. Dogecoin (DOGE)
Started as a joke based on the Doge meme in 2013, Dogecoin has proven popular ever since – and Elon Musk’s recent interest has propelled it to new highs.
15. Wrapped Bitcoin (WBTC)
A bitcoin-backed ERC20 token that can be used on Ethereum, including as collateral for DeFi dApps. WBTC should trade at parity with BTC.
16. Aave (AAVE)
One of the largest DeFi initiatives, lending platform Aave allows users to borrow one crypto against collateral in another token and popularised so-called flash loans.
17. NEM (XEM)
NEM is a 2015 project that sought to improve on Bitcoin and other blockchains that provided digital asset functionality, with more efficient consensus. Its partnerships with financial organisations have helped boost its profile into the top 20.
18. Solana (SOL)
A high-scale blockchain that aims to take market share for DeFi from Ethereum by providing better-suited features, based on a new Proof-of-History consensus.
19. Cosmos (ATOM)
A scaling and interoperability solution powered by the ATOM token. Cosmos aims to link different blockchains so they can communicate freely – an important goal for DeFi.
20. Crypto.com Coin (CRO)
The native token of the Crypto.com payments and exchange network, CRO is used to settle transactions between cryptocurrencies behind the scenes and confers rewards to users.
21. Monero (XMR)
One of the earliest privacy currencies, Monero uses ring signatures to preserve anonymity, but has become popular with darkweb markets and drawn interest from regulators.
22. Bitcoin SV (BSV)
A fork of Bitcoin Cash, BSV is extremely controversial in the crypto space, claiming to be the ‘true’ Bitcoin created by Satoshi Nakamoto – despite being worth even less than BCH.
23. EOS (EOS)
A blockchain operating system designed to bring familiarity and ease of development to decentralised applications, EOS achieves high scale and throughput at the cost of centralisation, with only 21 network validators.
24. Huobi Token (HT)
The native token of the very popular Huobi exchange. HT gains value from buybacks funded by transaction fees and can be used to purchase account upgrades and other perks.
25. Tron (TRX)
A high-scale blockchain platform focused on content delivery and entertainment. Tron acquired BitTorrent in 2018 as part of its aim of disrupting the content industry.
26. IOTA (MIOTA)
IOTA is an internet-of-things (IoT) protocol focused on high-scale microtransactions. Instead of a blockchain, it uses a ‘Tangle’ that does not require fees to be paid.
27. Theta (THETA)
Theta is a decentralised video-streaming platform that allows users to share bandwidth and other computational resources. Designed to disrupt the inefficient streaming industry, Theta has a significant addressable market.
28. Terra (LUNA)
Terra uses stablecoins to power payments. Given the interest in stablecoins in the crypto sector and by banks and regulators, Terra could be worth watching as a bellwether for the sector.
29. Neo (NEO)
Originally known as AntShares, Neo is the first Chinese blockchain project and a platform for digital identity, payments and assets. Often known as the ‘Chinese Ethereum’, it is very popular in the country.
30. FTX Token (FTT)
FTT is the native token of the FTX trading platform – a very popular crypto exchange among derivatives traders. The value of FTT is driven by activity on the FTX platform.
You’ll notice some clear themes in this list, including stablecoins, DeFi platforms and Ethereum rivals, coins that derive their value from exchanges, and those that take on specific sectors. The challenge for the crypto investor is gauging how successfully they will meet their aims, and the value they might ultimately have as a result.