This article was written specifically for Investing, com.
The cryptocurrency asset class hit new highs in April and May, with the two leaders, Bitcoin and Bitcoin, skyrocketing to over $ 65,000 and $ 4,400 per token, respectively. Other cryptocurrencies, even those that started out as a joke like Dogecoin, have experienced incredible parabolic surges that have brought huge profits to those who prudently put the tokens back into their wallets.
Nothing supports a fast growing market like an aggressive bull market. The rise of Bitcoin, Ethereum and other cryptocurrencies has spawned thousands of new tokens. While many of them may have unique utility, the main driving force behind token prices and growing interest is the opportunity for investors and traders to make profits that exceed their wildest dreams.
Little, if any, investment has been made in my life, like the one that made it possible to turn $ 10 into more than $ 10 million. A lottery-like profit is an incentive for market participants to mine and buy rough diamonds that will make big bucks in the coming weeks, months and years. During this time, the vast majority of tokens will turn to dust in computer wallets. Leading large market cap tokens provide traders with the liquidity they need and are likely to survive. and are in the top 35, which puts them in an exclusive club, in which only about a third of 1% of all cryptocurrency is concentrated.
Leaders are closer to recent lows than highs
Several tweets from Elon Musk of Tesla Inc (NASDAQ 🙂 announcing the decision not to accept bitcoins for his electric vehicles may have sparked some bitcoin sales, but it is China’s ban that introduces the digital yuan, ending the parabolic movement of major cryptocurrencies.
The weekly chart shows bitcoin rally to a high of $ 65,520 on April 14, the day Coinbase Global Inc (NASDAQ 🙂 was listed on the NASDAQ. Shopping stopped and Elon and the Chinese helped bring the price down to a low of $ 30,205 in mid-May. At around $ 36,400 on June 9, Bitcoin remains much closer to its low than it has since mid-April.
Ethereum futures peaked at $ 4,406.25 per token during the week of May 10. Two weeks later, the price dropped to a low of $ 2,062. Below the $ 2,600 level on June 9, Ethereum is also closer to lows than its recent all-time high.
The number of new tokens continues to grow
I started tracking the number of tokens in the cryptocurrency asset class at the end of Q1 2019, when there were 2,136 cryptocurrencies in the asset class. By the end of 2019, that number had more than doubled to 4,986; at the end of last year, according to CoinMarketCap, it was 8,513, at the time of this writing, the number of cryptocurrencies was 10,350. By the time you read this article, it will be higher.
The total asset class value peaked at nearly $ 2.5 trillion in April and early May, when Bitcoin and Ethereum peaked. The correction brought it back below the $ 1.6 trillion mark as of June 9th. Meanwhile, Apple Inc (NASDAQ 🙂 is the largest company in the world by market capitalization, with a value of approximately $ 2.122 billion. The bottom line is that the asset class remains relatively small, although the number of tokens continues to grow. New cryptocurrencies stifle the speculative appetite of the market as they represent new lottery tickets that attract buyers.
There is a difference between trading and investing. In the world of cryptocurrency, it is important to make a distinction. Investments are passive as speculators pay for the token and store it on platforms or computer wallets, hoping that it will make a profit in Bitcoin, Ethereum, or Dogecoin. Trading involves buying and selling cryptocurrencies for a profit that relies on liquidity, which creates tight spreads between supply and demand, allowing buy and sell orders to be executed efficiently. Few cryptocurrencies offer liquidity levels that make them potentially attractive to traders.
Kusama – 29th largest cryptocurrency
Kusama ranked 29th among cryptocurrencies on June 9 with a market cap of $ 3.937 billion at $ 466 per token. KSM is a scalable network of specialized Substrate blockchains and is almost the same codebase as Polkadot (DOT), the ninth leading cryptocurrency with a market cap of $ 21.4 billion. Substrate is a modular framework for creating custom blockchains by composing custom or pre-built components or a library that helps you create or produce custom logic. You can find out more about Kusama on his website.
The graph shows that since the end of 2019, the KSM rate has grown from less than $ 2 per token to nearly $ 600 in May 2021. KSM is another success story for early stage investors. The daily trading volume of around $ 678.5 million provides liquidity for both buyers and sellers.
Algorand – number 34
Algorand (ALGO) is ranked 34th on the digital currency charts with a market cap of $ 3.275 billion at $ 1.07 per token. The public version of Algorand is a blockchain-based decentralized network that allows developers to create new cryptocurrency-based applications. The ALGO platform has applications in real estate, copyright, microfinance, and more. The ALGO website details the protocol, vision and mission.
As you can see from the chart, the ALGO journey was eventful. The token began trading at $ 2,159 in June 2019, fell to a low of less than 15 cents in March 2020, and did not reach a series of lower highs until 2021. At 1 0.07 on June 9, ALGO is in the middle of its long-term trading range. On June 9, the trading volume was about $ 405 million.
Only risk what you can lose
When buying cryptocurrencies, from the most to the least liquid, the best advice is to only risk the capital that you are willing to lose. High levels of volatility and uncertainty about future regulations and government intervention make any investment in this asset class a risky business.
Trading is another matter, since liquidity is the most important factor. Trading requires the execution of buy and sell orders with a small gap between supply and demand. The higher the critical mass or market capitalization, the better the liquidity for traders looking to open and close risky positions in the cryptocurrency arena.