Cryptocurrency All-in-One For Dummies. Peter Kent

Heck, some people even think that Bitcoin may be the worst cryptocurrency to own or to invest in. This is because so many other digital coins are available that have made massive improvements to the Bitcoin model to avoid its disadvantages.

      This chapter covers some of the most famous cryptos as of 2021. But because the cryptocurrency market is ever-changing, you also find out how to navigate your way through all the up-and-coming cryptos for years to come.

Celebrating Celebrity Cryptocurrencies by Market Cap

      One of the fastest ways to navigate through popular cryptocurrencies is to check out their ranking based on their market capitalization, or market cap. Traditionally, market cap is the value of a company that’s traded on the stock market. You can calculate it by multiplying the total number of shares by the present share price.

In the cryptoworld, market capitalization shows the value of all units of a specific cryptocurrency that are for sale right now. To calculate a cryptocurrency’s market cap, simply multiply the cryptocurrency’s current price by its circulating supply. Circulating supply is the best approximate number of coins that are circulating in the market and in the general public’s hands.

      Market cap = Price × Circulating supply

      

Knowing about a crypto’s market cap and its ranking versus other coins is important because that information can quickly show you how popular the coin is and how much money you may be able to make from it. You can find out about all cryptocurrencies’ market caps by visiting websites such as http://coinmarketcap.com, www.cryptocompare.com/, https://coincodex.com/, and www.coingecko.com/.

      

Market cap can’t tell you everything about a cryptocurrency’s investment potential. Lots of other factors, such as forks, regulation, rumor, and so on, can affect a cryptocurrency’s value. See Book 5, Chapter 4 to find out more about analyzing a cryptocurrency’s performance.

      

A higher market cap isn’t necessarily a good thing. Investors who can take higher risks may prefer cryptocurrencies with a lower market cap because those may offer more room for the market cap to increase. However, if you want to play it safe and avoid volatility or vanishing risk, you may prefer going with cryptocurrencies with a higher market cap. See Book 5, Chapter 2 for more.

      With a knowledge of what role a coin’s market cap plays in the industry, you can start to evaluate cryptocurrencies based on that metric.

      MINEABLE VERSUS NONMINEABLE CRYPTOCURRENCIES

      Where does cryptocurrency come from? Cryptocurrency can be mined — the least common form, actually — or it can be pre-mined.

      To say that a cryptocurrency has been pre-mined, or is nonmineable, simply means that the cryptocurrency already exists. The blockchain is a ledger containing information about transactions. When the blockchain was first created, the ledger already contained a record of all the cryptocurrency that the founders planned for. No more will be added; it’s all there in the blockchain already.

      Bitcoin

      Ranking number one on the list, Bitcoin was developed in 2008. As of September 2021, Bitcoin’s market cap is around $951 billion.

      A bit of Bitcoin background

      

An entity called Satoshi Nakamoto invented Bitcoin. Satoshi claimed to be a man living in Japan, born on April 5, 1975. Kiana was actually living in Japan, completing her studies in electrical engineering in Tokyo, when Bitcoin hit the scene. Bitcoin wasn’t really a big thing in Japan at that time. That’s why most speculation about the true identity of Satoshi points to a number of cryptography and computer science experts of non-Japanese descent living in the United States and various European countries.

      But Satoshi’s anonymity isn’t really a big deal, because Bitcoin (and other cryptocurrencies, for that matter) is supposed to be open source and decentralized, as we explain in Chapter 2 of this minibook. In fact, according to Bitcoin.org, no single person or entity “owns the Bitcoin network much like no one owns the technology behind email.” Bitcoin users around the world control Bitcoin, with the developer improving the software and the forkers making some radical changes. However, the main idea behind Bitcoin and Bitcoin’s protocol can’t be changed.

      In mid-April 2011, Bitcoin’s market cap was about $6 million. In April 2021, the market cap was over a trillion dollars. If you had bought 1 Bitcoin for $2 in November 2011 (something Kiana’s investor friends told her to do that she ignored), your single Bitcoin would have been worth $64,000 in April 2021. Of course, many initial investors bought more than one Bitcoin at the time, which is exactly how all those Bitcoin millionaires were made. If you had bought 100 Bitcoins in November 2011 for a paltry sum of $200, by April 2021 they would have been worth $12.8 billion!

      But by the time everyone started talking about Bitcoin, it went crashing down to around $120 billion and stayed there for most of 2018. It maintained its number one ranking among all other cryptocurrencies, though. The main reason behind this position may have been that most people had heard a lot (relatively speaking) about Bitcoin but not so much about other cryptocurrencies. So even though they had several hundred other altcoins to choose from, even some that may have been better long-term alternatives to Bitcoin, most newbies who wanted to get involved in the market started out with Bitcoin.

      Another reason for Bitcoin’s huge market cap is its accessibility. It’s pretty safe to say that all cryptocurrency exchanges (see Book 5, Chapter 3) carry Bitcoin. But not all exchanges list all altcoins, at least for now.

      Bitcoin characteristics

      Here are some main features of Bitcoin:

       Bitcoin’s trading symbol is BTC.

       Bitcoin is mineable.

       Coin creation occurs through proof of work (PoW; see Chapter 2 of this minibook).

       Transaction time is between 10 minutes and 24 hours.

       Transactions aren’t fully anonymous.

       Bitcoin is decentralized.

       Mining Bitcoin requires a lot of (wasted) energy.

      

Because Bitcoin has been the superstar of all cryptocurrencies, it tends to pull the entire market along. Generally speaking, the whole market sentiment follows the volatility of Bitcoin in longer-term time frames (with many past exceptions). You can use this piece of information in technical analysis for investing, as covered in Book 5, Chapter 10. Head to Book 3 to