As any investing enthusiast, it is hard to turn a blind eye to the recent surge of cryptocurrency. Yet, at the same time one has to be skeptic towards the value and the impressive growth specific cryptocurrencies and their investors have come to enjoy in the past 3-4 years. It is hard to deny that even in the bullish market which has seen the S&P500 rise approx. 15% YTD, NASAQ rise approx. 30% YTD, DOW Jones Industrial rise approx. 19% YTD, the returns of those who invested in cryptocurrencies far outweigh those of stocks and futures. Bitcoin alone has increased approx. 760% YTD, reaching a market cap of approx.$318.18B, even after having faced scrutiny and pushback from institutions and country officials. Currently, the top three cryptocurrencies include, Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) with market capitalizations of $318.13B, $76.63B and $38.74B, respectively.
The first of its kind was Bitcoin which was launched in 2008 by an entity with the pseudo name of Satoshi Nakamoto. Since its inception, there have been many budding versions of cryptocurrencies each with different pros and cons.
It is a digital/virtual currency that can be transferred between two parties securely using cryptography. Due to this level of encryption security, it is impossible to counterfeit. Additionally, cryptocurrency is not centralized, meaning it is not issues by any central authority, thus, rendering it immune to any government interference or manipulation.
These different digital currencies are held and stored online in a Blockchain, which essentially an online ledger, that shows all of the transactions that have taken place using that specific cryptocurrency.
As stated above, the reason for the vast growth seen in this sector is due to the attributes of the Blockchain technology which provides, security, anonymity and data integrity, without the need of any third-party organization to control / facilitate the transactions[i]. The combination of these qualities, in combination with the large range of innovative use for cryptocurrencies has led to an explosion of this sector.
At the time of writing this article, the market capitalization of $377,679,800,000, with Bitcoin (BTC) holding 55.7% of the market share. Bitcoin is followed by Ethereum (ETH), Bitcoin Cash (BCH), Ripple (XRP) and IOTA (MIOTA), together holding about 80% of the market share.
These cryptocurrencies are not all similar however, each has specific qualities that renders them unique. In the following paragraph, we will highlight the six different categories of cryptocurrencies.
There are essentially six different categories of cryptocurrencies, all which have different specific qualities and uses:
Staking ie. NEO, Buzzcoin:
These currencies generate free cash from the amount of money invest. The concept is similar to dividend.
Currencies – ie. Bitcoin, Litecoin:
These currencies can be used to make purchases.
Privacy – ie. Monero, PIVX:
These currencies allow for holding coins that are private that are untraceable. These allow you to hold coins on a network with a private ledger
Masternode – ie. Dash, Neutron:
Individuals can set up servers that the specific cryptocurrency can use to perform the calculations needed for transactions to occur, in return, the provider of the server is awarded a certain percentage of coins. These essentially requier a significant investment ranging in the thousands of dollars from the investors.
Platforms – ie. NoLimitCoin, STEEM:
These platforms that provide functionality and provide coins in return for service.
Builders – ie. Ethereum, NEO:
These currencies are the most valuable type of currencies, as they provide a platform for developers to use when building their technology.
There has certainly been a steady progression in various different types of investors, ranging from small family offices and retail investors to high net worth individuals and institutions. There is still some sense of uncertainty and distrust when it comes to big financial institutions and hedge funds. One of the main areas of concern is the lack of regulation. Additionally, the lack of available futures and hedging instruments are hindering large institutional investment and thus greater liquidity.
Most financial institutions and hedge funds will naturally look to the most liquid and prominent cryptocurrencies to invest in. These would include the likes of BTC, ETH and XRP.
Written by: Dr. Tiam Feridooni MD, PhD, BSc
Dr. Feridooni, graduated from Dalhousie Medical School in May, 2018. Prior to enrolling in medical school, he completed his Bachelor of Science with Honours in 2010 in Biochemistry. He then obtained his PhD at Dalhousie University in Pharmacology in 2014, with a focus around regenerative medicine and stem cell transplantation.
Dr. Feridooni has been published numerous high impact journals and has also co-authored a few books.
Dr. Feridooni has believes that blockchain technology has the ability to revolutionize today’s healthcare system which he believes to be decades behind in accessing and storing medical information. His passion for medicine, technology and the financial markets lead to the foundation of Point Pleasant Park.