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Forbes Advisor provides this content for educational purposes only and is not intended to assist you in deciding whether to invest in cryptocurrencies. When investing in cryptocurrencies or other investments, you should always obtain appropriate financial advice and only invest an amount that you can afford to lose.
There are thousands of different cryptocurrencies, from Bitcoin and Ethereum to Dogecoin and Tether, and it can be overwhelming for anyone looking to enter the risky world of cryptocurrencies for the first time.
These are a selection of some of the top cryptocurrencies based on market capitalization, or the total value of all coins currently in circulation.
What is cryptocurrency?
Cryptocurrency is a high-risk digital asset that can be circulated without the central control authority of banks or governments. To date, there are over 26,000 crypto projects representing the entire £917 billion crypto market.
1. Bitcoin (BTC)
- Market capitalization: £673bn
Bitcoin (BTC), created by Satoshi Nakamoto in 2009, is the original cryptocurrency. Like most cryptocurrencies, BTC runs on a blockchain, a ledger that records transactions distributed across a network of thousands of computers. Bitcoin is meant to be kept safe from fraudsters because additions to the distributed ledger must be verified by solving cryptographic puzzles, a process called proof of work.
Bitcoin’s price has skyrocketed and fallen over its lifetime. In May 2016, one Bitcoin was worth around £370. As of November 2021, the price of 1 Bitcoin was £48,005; as of February 6, 2024, it was approximately £34,314. This shows its variability.
2. Ethereum (ETH)
- Market capitalization: £226bn
Ethereum, which is both a cryptocurrency and a blockchain platform, has some A favorite of program developers.
The price of Ethereum has also experienced significant value fluctuations.
From April 2016 to February 6, 2024, the price increased from around £8 to around £1,888. At its peak in November 2021, its value was £3,400, showing its volatility.
3. Tether (USDT)
Unlike other forms of cryptocurrency, Tether (USDT) is a stablecoin. This means that it is pegged to a fiat currency, such as the US dollar or the euro, and maintains the same value as one of the cryptocurrencies.
This means, in theory, that Tether’s value is considered more stable than other cryptocurrencies, making it a favorite of some investors who are wary of the extreme volatility of other coins. To do. However, it has fallen below the $1 peg in the past.
4. Binance Coin (BNB)
Binance Coin is a type of cryptocurrency. When it was released in 2017, it cost less than 10p. It peaked at around £484 in July 2017 and as of February 6, 2024, its value is £240, showing its volatility.
5. Solana (SOL)
Developed to power decentralized finance (DeFi) usage, decentralized apps (DApps), and smart contracts, Solana is a unique hybrid proof-of-stake and proof-of-stake solution designed to process transactions quickly and securely. of history mechanism. Solana’s native token, SOL, powers the platform.
When launched in 2020, SOL prices started at £0.57. The highest price was at the end of October 2021 at around 191 pounds. Then on February 6, 2024, the price was around 77 pounds, showing its volatility.
6. Ripple (XRP)
Created by some of the same founders of digital technology and payment processing company Ripple, XRP can be used to facilitate the exchange of different types of currencies on its network.
At the beginning of 2017, the price of XRP was £0.004. At the end of April 2021, the price peaked at around £1.19, but as of February 6, 2024, its value was £0.40, showing its volatility.
7. US Dollar Coin (USDC)
Like Tether, USD Coin (USDC) is a stablecoin. This means that it is theoretically pegged to the currency US dollar, aiming for a ratio of 1 USD to 1 USDC. USDC is powered by Ethereum and can be used to complete global transactions.
8. Cardano (ADA)
A bit late to the cryptocurrency scene, Cardano (ADA) is famous for being an early adopter of proof-of-stake verification. This method is designed to reduce transaction times, reduce energy usage and environmental impact, with the aim of removing the competitive and problem-solving aspects of transaction verification on platforms like Bitcoin. Masu.
Cardano also enables smart contracts and decentralized applications, similar to Ethereum, powered by its native coin, ADA.
In 2017, Cardano’s ADA token cost around £0.015. Cardano price peaked at around £2.06 as of August 2021. As of February 6, 2024, its price is 0.39 GBP, indicating its volatility.
9. Avalanche (AVAX)
Avalanche (AVAX) is a relatively new cryptocurrency. Despite only being born in 2020, it has gained tremendous popularity as an alternative for Ethereum developers. Avalanche has become one of the larger cryptocurrencies with a market capitalization of around £5.38 billion.
AVAX has a market capitalization of £9bn and is currently trading at £27.17.
10. Dogecoin (DOGE)
Dogecoin famously started as a joke in 2013, but quickly evolved into a prominent cryptocurrency thanks to its dedicated community and creative memes. Unlike many other cryptocurrencies, Dogecoin has no limit to the number that can be created, so an increase in supply can cause the value of the currency to fall.
In 2017, the price of Dogecoin was £0.00016. The highest price was in May 2021 at around 0.455 pounds. Then, by February 2024, the price was £0.06, showing its volatility.
*Market cap and prices are from CoinMarketCap and are current as of February 6, 2024.
Cryptocurrencies are not regulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that buying cryptocurrencies risks losing all your money with no possibility of compensation.
Frequently asked questions (FAQ)
What is cryptocurrency?
Cryptocurrency is a type of currency that exists only in digital form and is a high-risk investment. Cryptocurrency can be used to pay for purchases online or held as an investment.
How is trading virtual currencies different from stocks?
Although it is possible to invest in cryptocurrencies, it is very different from traditional investments such as stocks and shares.
When investors buy stock, they are buying ownership of the company, which means they have rights such as voting on the direction of the company. If the company goes bankrupt, you can also receive a partial payment from the company’s liquidated assets after creditors have been paid.
Purchasing cryptocurrencies does not give investors any ownership other than the tokens themselves. It is similar to exchanging one form of currency for another. When a cryptocurrency loses value, its owners are affected by a corresponding drop in price.
There are some other important differences to keep in mind.
- Trading hours:Trading of stocks takes place only during stock exchange business hours. For example, trading hours on the London Stock Exchange are Monday to Friday from 8:00 a.m. to 4:30 p.m. Cryptocurrency markets are never closed, so trading takes place 24 hours a day, 7 days a week.
- Regulations:Stock trading is subject to regulation, and the finances of listed companies are a matter of public record. In contrast, cryptocurrencies are not regulated investment vehicles, so investors may not be aware of the inner workings of their cryptocurrencies or the developers working on them.
- Volatility:Investing in both stocks and cryptocurrencies involves risk, and both can result in losses as well as gains. However, stocks are directly linked to companies and generally rise or fall depending on the company’s performance. Cryptocurrency prices are more speculative and no one is yet sure about their value. As a result, people’s emotions are more unstable and are influenced by small things such as tweets from celebrities.
Is there a tax on cryptocurrencies?
Tax treatment depends on individual circumstances and may change in the future.
The content of this article is provided for informational purposes only and is not intended to be, and does not constitute, tax advice.
Tax regulations may also apply to virtual currencies, so it is important to pay attention to them.
Cryptocurrency is treated as a capital asset, similar to stocks, rather than cash. This means that if you sell your virtual currency and make a profit, that profit will be subject to capital gains tax.
This also applies if cryptocurrency is used to pay for your purchase. If an investor receives more value than he or she paid for, he or she may be eligible for regular tax deductions and may be liable to pay taxes on the difference.
Are there cryptocurrency exchange traded funds (ETFs)?
Given that there are thousands of cryptocurrencies in existence (and the high volatility associated with most of them), investors are advised to invest in cryptocurrencies in order to potentially minimize the risk of further loss. You have the option of taking a multifaceted approach.
Cryptocurrency ETFs began appearing at the end of 2021.