Cryptocurrencies or Crypto have taken the world by storm, with the value of Bitcoin, Ethereum and other cryptocurrencies reaching all time highs in November 2021. If you’re thinking of buying your first cryptocurrency, it can be tough to know where to start. With so many different options available, it can be hard to determine which ones are worth your investment.
What is Cryptocurrency?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone, anywhere to send and receive payments.
Instead of physical money being carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency, the transactions are recorded in a public ledger.
Like other commodities, the price of cryptocurrencies can fluctuate rapidly. If you already own cryptocurrency, you can transfer it to your account from a digital wallet or another platform, then use it to trade or make a purchase. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Another thing to note is that exchange fees vary depending on what you’re buying and how you’re buying it.
There are also transaction fees any time you move crypto from one wallet to another, or from an exchange to a wallet. You can find information about current fees from exchanges. Also, when you start to initiate a transaction, it will tell you what the transaction fee will be before you confirm it.
What Are the Top 5 Cryptocurrencies to Watch in 2022
Before we look into cryptocurrencies worth investing, we need to first understand what determines the value of a cryptocurrency:
Node Count: Measurement of how many active wallets on the network exist. It shows how strong the community of a cryptocurrency is. The more nodes, the stronger the community.
Market Cap: Total value of a cryptocurrency. It is calculated by multiplying the price of the cryptocurrency and the number of coins in circulation.
Rising Demand: Supply and demand is a big factor. If more people are trying to buy while others are willing to sell, the price will go up.
Mass Adoption: When a crypto achieves mass adoption, it means it will lead to an increase in demand.
Inflation of Fiat Currencies: When a fiat currency (i.e., USD) falls, then the price of cryptocurrency might go up as you can get more of that fiat with your cryptocurrency.
Production Cost: The direct costs and opportunity costs of producing a coin can also determine the value of a cryptocurrency.
So, what are some of the cryptocurrencies that are worth keeping an eye on? We have compiled a list of cryptocurrencies to watch in 2022:
1. Bitcoin (BTC)
Market cap: $575 billion (as of 9th Jun)
Circulating supply: 19 million BTC out of 21 million BTC
Bitcoin is the first decentralized cryptocurrency and remains the number one digital currency in the world by market cap. Being the very first currency that is promised to solve the inefficiencies of traditional currencies, it gives Bitcoin the first mover-advantage, allowing it to take the lead in the crypto space.
2. Ethereum (ETH)
Market cap: $216 billion (as of 9th Jun)
Circulating supply: 121.1 million ETH
More than just a decentralized currency that can be transacted like Bitcoin, Ethereum allows developers to build and launch decentralized applications for any purpose, including creating other cryptocurrencies.
The Ethereum network is fuelled by a currency called Ether. It is used to reward miners and also to pay for services and transaction fees.
3. Solana (SOL)
Market cap: $13 billion (as of 9th Jun)
Circulting supply: 341 million SOL out of 511 million SOL
Officially launched in 2020, Solana is the leading Ethereum competitor where both have smart contract capabilities that allow running decentralized finance (DeFi) applications and non fungible tokens (NFTs). Ethereum follows Proof of Work (PoW) leading to a more decentralized network, but less scalability. Solana follows Proof of History (PoH), which is less secure but more efficient, leading to high-speed and low-cost transactions.
The SOL token is the native currency in Solana’s ecosystem. By owning SOL tokens, users can access the suite of projects that are built on the Solana network.
4. Avalanche (AVAX)
Market cap: $6.6 billion (as of 9th Jun)
Circulating supply: 280 million AVAX out of 404 million AVAX
Launched in 2020, Avalanche is a blockchain platform that is smart contract-capable. Similar to Solana, Avalanche is meant to overcome the limitation of Ethereum. The native token AVAX is a utility token where AVAX serves as the Avalanche ecosystem’s medium of exchange. In other words, AVAX is used as currency within the network, typically for fee collection in transactions, incentives among other use cases.
Same like any other tokens, you can stake AVAX too and stakers are then rewarded with more AVAX, a great way to earn passive income while owning the tokens.
5. Polygon (MATIC)
Market cap: $4.8 billion (as of 9th Jun)
Circulating supply: 7.96 billion MATIC out of 10 billion MATIC
Polygon is a framework for building interconnected blockchain networks, addressing some of Ethereum’s major limitations including its throughput, poor user experience, and lack of community governance.
MATIC is the utility token of Polygon where it is used for a variety of purposes in the Polygon ecosystem.
The Benefits and Risks of Investing in Cryptocurrencies
Investing in cryptocurrencies have several advantages:
- Decentralization: Cryptocurrencies are not subject to government or financial institution control.
- Anonymity: Transactions can be made anonymously, without revealing personal information.
- Transparency: Cryptocurrencies are transparent, and the ledger of all transactions is available for everyone to see.
- Security: Cryptocurrencies are secure, as they use cryptography to protect against fraud and hacking.
- Transaction speed: Transactions are processed quickly, and there are no fees for international transactions.
- Accessibility: Cryptocurrencies are available to anyone with an internet connection.
There are also several risks associated with investing in cryptocurrencies:
- Unregulated: Cryptocurrencies are not regulated by governments or financial institutions.
- Volatile: The price of cryptocurrencies is highly volatile, and investors could lose all of their investments.
- Illegal activities: Cryptocurrencies have been used for illegal activities, such as money laundering and drug trafficking.
- Hacking: Cryptocurrency exchanges have been hacked in the past, and investors could lose their money.
- Loss or Destruction of Private Keys: If an investor loses their private key, they could lose their investment.
- Regional Regulation: Some countries have banned or restricted the use of cryptocurrencies.
Despite the risks, many people are still interested in investing in cryptocurrencies, as they offer the potential for high returns. If you’re thinking of investing in a cryptocurrency, it’s important to research the risks and benefits carefully before making a decision.
Is Cryptocurrency an Effective Replacement for Remittances? No, at Least Not Yet.
Digital currencies are certainly an additive factor, and crypto will no doubt have an impact in the years to come. But it will take time, and there are several headwinds to mainstream adoption and displacing cash for the millions of families who continue to rely on it.
For one, cryptocurrencies have not reached mass adoption yet, meaning the purchasing of everyday goods are still very dependent on fiat or the traditional currency. That said, if you are sending money overseas, chances are, traditional currencies are still the best option as they are still most recognized.
With Instarem, you can enjoy peace of mind knowing that your money is in safe hands. Instarem is a regulated financial institution with years of experience in the money transfer industry. Instarem offers a fast, reliable and affordable service that is perfect for anyone who needs to send money overseas.
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Disclaimer: This article is intended for informational purposes only. All details are accurate at the time of publishing. Instarem has no affiliation or relationship with products or vendors mentioned.