Textbook Entry Point For Major Cryptocurrencies

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Textbook Entry Point For Major Cryptocurrencies

If You Missed The First Bounce…

If you missed the first bounce cryptocurrencies made from their post-correction bottom they are doing it again. I don’t know any better way to say it that this, the major crytpocurrency pairs are offering text-book entries that buyers should not ignore. Sure, they may retest support and dip a little lower but they won’t go much lower and any purchase made now is likely to see big gains in the near, short and long term.

A couple of factors have combined to produce this opportunity. First, the wild media attention BTC was garnering when it traded near $20,000 has evaporated and with it a lot of curious interest and the need to “get in now, before it’s too late”. Second, there have been a couple of negative news bits over the last week that have 1) caused a bit of concern and 2) put a damper on access to the market. Together these factors add up to a cooling market and one that has settled to a normalized level.

The news. First is a hack, suspected hack, reported hack we’re not really sure at a major cryptocurrency exchange that caused some traders to flee the market. Bottom line, no funds were stolen so fears are misplaced. Second, the SEC has stated that all US based exchanges need to be registered with them and must comply to basic oversight is not unexpected a net-positive longer term although it does limit some access nearer-term. Finally, the trustees of the Mt GOX disaster are selling their BTC’s in order to recoup damages for those hurt by the debacle. This comes at a time in which buyers are shy, depressing prices to extreme lows.

Bitcoin has fallen about 25% in the last week. The coin met resistance at a downtrend line and is falling under that pressure, now trading below the short-term moving average. Support began to push-back on prices at the $9000 level which is now the new support target. The indicators are bearish but also very weak, consistent with a near term swing in momentum rather than a reversal in prices. Of the three major cryptocurrencies, BTC ETH and LTC, this one looks the weakest. A move below $9000 could go to $6,000 but I would not expect that without the emergence of a new catalyst.

Ethereum’s chart is looking much, much more bullish. The coin suffered greatly over the past week and is now bouncing from a strong support level. Support is the $700 line, a level tested and bounced from two months ago. The indicators are bearish and consistent with this test with the caveat of showing oversold conditions at an extreme price level driven by non-fundamental news. A new catalyst may drive the coin below $700 but until that happens this is a prime entry point. A move to $900 could be expected near-term, a move above that would be bullish and may go up to the all-time high.

Litecoin has likewise fallen to test a support level. This test confirms the sharp move higher which occurred three weeks ago. Support is at the bottom of that long green candle, near $160. While it may not be possible to get LTC at $160 again purchases near that level, below $200, are likely to see solid gains in the near future. A revert to mean should take the coin back to $200 at least, a move above that would be bullish and consistent with the price reversal indicated by the February 14th candle.

Cryptocurrency

What Is a Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

Key Takeaways

  • A cryptocurrency is a new form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
  • The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.
  • Blockchains, which are organizational methods for ensuring the integrity of transactional data, is an essential component of many cryptocurrencies.
  • Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.
  • Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

Understanding Cryptocurrencies

Cryptocurrencies are systems that allow for the secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Types of Cryptocurrency

The first blockchain-based cryptocurrency was Bitcoin, which still remains the most popular and most valuable. Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch.

Bitcoin was launched in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto.”   As of Nov. 2020, there were over 18 million bitcoins in circulation with a total market value of around $146 billion. 

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Some of the competing cryptocurrencies spawned by Bitcoin’s success, known as “altcoins,” include Litecoin, Peercoin, and Namecoin, as well as Ethereum, Cardano, and EOS. Today, the aggregate value of all the cryptocurrencies in existence is around $214 billion—Bitcoin currently represents more than 68% of the total value. 

Some of the cryptography used in cryptocurrency today was originally developed for military applications. At one point, the government wanted to put controls on cryptography similar to the legal restrictions on weapons, but the right for civilians to use cryptography was secured on grounds of freedom of speech.

Special Considerations

Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology, which is used to keep an online ledger of all the transactions that have ever been conducted, thus providing a data structure for this ledger that is quite secure and is shared and agreed upon by the entire network of individual node, or computer maintaining a copy of the ledger. Every new block generated must be verified by each node before being confirmed, making it almost impossible to forge transaction histories.

Many experts see blockchain technology as having serious potential for uses like online voting and crowdfunding, and major financial institutions such as JPMorgan Chase (JPM) see the potential to lower transaction costs by streamlining payment processing.   However, because cryptocurrencies are virtual and are not stored on a central database, a digital cryptocurrency balance can be wiped out by the loss or destruction of a hard drive if a backup copy of the private key does not exist. At the same time, there is no central authority, government, or corporation that has access to your funds or your personal information.

Advantages and Disadvantages of Cryptocurrency

Advantages

Cryptocurrencies hold the promise of making it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or credit card company. These transfers are instead secured by the use of public keys and private keys and different forms of incentive systems, like Proof of Work or Proof of Stake.

In modern cryptocurrency systems, a user’s “wallet,” or account address, has a public key, while the private key is known only to the owner and is used to sign transactions. Fund transfers are completed with minimal processing fees, allowing users to avoid the steep fees charged by banks and financial institutions for wire transfers.

Disadvantages

The semi-anonymous nature of cryptocurrency transactions makes them well-suited for a host of illegal activities, such as money laundering and tax evasion. However, cryptocurrency advocates often highly value their anonymity, citing benefits of privacy like protection for whistleblowers or activists living under repressive governments. Some cryptocurrencies are more private than others.

Bitcoin, for instance, is a relatively poor choice for conducting illegal business online, since the forensic analysis of the Bitcoin blockchain has helped authorities to arrest and prosecute criminals. More privacy-oriented coins do exist, however, such as Dash, Monero, or ZCash, which are far more difficult to trace.

Criticism of Cryptocurrency

Since market prices for cryptocurrencies are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely, since the design of many cryptocurrencies ensures a high degree of scarcity.

Bitcoin has experienced some rapid surges and collapses in value, climbing as high as $19,000 per Bitcoin in Dec. of 2020 before dropping to around $7,000 in the following months.   Cryptocurrencies are thus considered by some economists to be a short-lived fad or speculative bubble.

There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.

Cryptocurrency blockchains are highly secure, but other aspects of a cryptocurrency ecosystem, including exchanges and wallets, are not immune to the threat of hacking. In Bitcoin’s 10-year history, several online exchanges have been the subject of hacking and theft, sometimes with millions of dollars worth of “coins” stolen. 

Nonetheless, many observers see potential advantages in cryptocurrencies, like the possibility of preserving value against inflation and facilitating exchange while being more easy to transport and divide than precious metals and existing outside the influence of central banks and governments.

The 10 Most Important Cryptocurrencies Other Than Bitcoin

Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on a decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies, inspiring an ever-growing legion of followers and spinoffs.

Key Takeaways

  • A cryptocurrency, broadly defined, is virtual or digital money which takes the form of tokens or “coins.”
  • Beyond that, the field of cryptocurrencies has expanded dramatically since bitcoin was launched over a decade ago, and the next great digital token may be released tomorrow, for all anyone in the crypto community knows.
  • Bitcoin continues to lead the pack of cryptocurrencies, in terms of market capitalization, user base, and popularity.
  • Virtual currencies such as Ethereum and XRP, which are being used more for enterprise solutions, have also become popular.
  • Some altcoins are being endorsed for superior or advanced features vis-à-vis bitcoins.

What Are Cryptocurrencies?

Before we take a closer look at some of these alternatives to Bitcoin, let’s step back and briefly examine what we mean by terms like cryptocurrency and altcoin. A cryptocurrency, broadly defined, is virtual or digital money which takes the form of tokens or “coins.” While some cryptocurrencies have ventured into the physical world with credit cards or other projects, the large majority remain entirely intangible.

The “crypto” in cryptocurrencies refers to complicated cryptography which allows for the creation and processing of digital currencies and their transactions across decentralized systems. Alongside this important “crypto” feature of these currencies is a common commitment to decentralization; cryptocurrencies are typically developed as code by teams who build in mechanisms for issuance (often, although not always, through a process called “mining”) and other controls.

Cryptocurrencies are almost always designed to be free from government manipulation and control, although as they have grown more popular this foundational aspect of the industry has come under fire. The currencies modeled after bitcoin are collectively called altcoins and have often tried to present themselves as modified or improved versions of bitcoin. While some of these currencies are easier to mine than bitcoin, there are tradeoffs, including greater risk brought on by lower levels of liquidity, acceptance and value retention.

Below, we’ll examine some of the most important digital currencies other than bitcoin. First, though, a caveat: it is impossible for a list like this to be entirely comprehensive. One reason for this is the fact that there are more than 2,000 cryptocurrencies in existence as of January 2020, and many of those tokens and coins enjoy immense popularity among a dedicated (if small, in some cases) community of backers and investors.

Beyond that, the field of cryptocurrencies is always expanding, and the next great digital token may be released tomorrow, for all anyone in the crypto community knows. While bitcoin is widely seen as a pioneer in the world of cryptocurrencies, analysts adopt many approaches for evaluating tokens other than BTC. It’s common, for instance, for analysts to attribute a great deal of importance to the ranking of coins relative to one another in terms of market cap. We’ve factored this into our consideration, but there are other reasons why a digital token may be included in the list as well.

1. Ethereum (ETH)

The first bitcoin alternative on our list, Ethereum is a decentralized software platform that enables Smart Contracts and Decentralized Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party. The applications on Ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the Ethereum platform and is sought by mostly developers looking to develop and run applications inside Ethereum, or now by investors looking to make purchases of other digital currencies using ether.   Ether, launched in 2020, is currently the second-largest digital currency by market cap after bitcoin, although it lags behind the dominant cryptocurrency by a significant margin. As of January 2020, ether’s market cap is roughly 1/10 the size of bitcoin’s.

During 2020, Ethereum launched a pre-sale for ether which received an overwhelming response; this helped to usher in the age of the initial coin offering (ICO). According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.”   Following the attack on the DAO in 2020, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC).   As of Jan. 8, 2020, Ethereum (ETH) had a market cap of $15.6 billion and a per-token value of $142.54. 

2. Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Launched in 2020, Ripple “enables banks to settle cross-border payments in real-time, with end-to-end transparency, and at lower costs.”   Ripple’s consensus ledger (its method of conformation) is unique in that it doesn’t require mining. Indeed, all of Ripple’s XRP tokens were “pre-mined” before launch, meaning that there is no “creation” of XRP over time, only the introduction and removal of XRP from the market supply according to the network’s guidelines. In this way, Ripple sets itself apart from bitcoin and many other altcoins. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power and minimizes network latency. 

So far, Ripple has seen success with its current business model; it remains one of the most enticing digital currencies among traditional financial institutions looking for ways to revolutionize cross-border payments. It is also currently the third-largest cryptocurrency in the world by overall market cap. As of Jan. 8, 2020, Ripple had a market cap of $9.2 billion and a per-token value of $0.21. 

3. Litecoin (LTC)

Litecoin, launched in 2020, was among the first cryptocurrencies to follow in the footsteps of bitcoin and has often been referred to as “silver to bitcoin’s gold.” It was created by Charlie Lee, an MIT graduate and former Google engineer. Litecoin is based on an open-source global payment network that is not controlled by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer-grade. Although Litecoin is like bitcoin in many ways, it has a faster block generation rate and hence offers a faster transaction confirmation time.   Other than developers, there are a growing number of merchants who accept Litecoin. As of Jan. 8, 2020, Litecoin had a market cap of $3.0 billion and a per-token value of $46.92, making it the sixth-largest cryptocurrency in the world. 

4. Tether (USDT)

Tether was one of the first and most popular of a group of so-called stablecoins, cryptocurrencies which aim to peg their market value to a currency or other external reference point so as to reduce volatility. Because most digital currencies, even major ones like bitcoin, have experienced frequent periods of dramatic volatility, Tether and other stablecoins attempt to smooth out price fluctuations in order to attract users who may otherwise be cautious.

Launched in 2020, Tether describes itself as “a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.”   Effectively, this cryptocurrency allows individuals to utilize a blockchain network and related technologies to transact in traditional currencies while minimizing the volatility and complexity often associated with digital currencies. On Jan. 8, 2020, Tether was the fourth-largest cryptocurrency by market cap, with a total market cap of $4.6 billion and a per-token value of $1.00. 

5. Bitcoin Cash (BCH)

Bitcoin Cash (BCH) holds an important place in the history of altcoins because it is one of the earliest and most successful hard forks of the original bitcoin. In the cryptocurrency world, a fork takes place as the result of debates and arguments between developers and miners. Due to the decentralized nature of digital currencies, wholesale changes to the code underlying the token or coin at hand must be made due to general consensus; the mechanism for this process varies according to the particular cryptocurrency.

When different factions can’t come to an agreement, sometimes the digital currency is split, with the original remaining true to its original code and the other copy beginning life as a new version of the prior coin, complete with changes to its code. BCH began its life in August of 2020 as a result of one of these splits. The debate which led to the creation of BCH had to do with the issue of scalability; the Bitcoin network has a strict limit on the size of blocks: one megabyte (MB). BCH increases the block size from one MB to eight MB, with the idea being that larger blocks will allow for faster transaction times.   It also makes other changes, too, including the removal of the Segregated Witness protocol which impacts block space. As of Jan. 8, 2020, BCH had a market cap of $4.4 billion and a value per token of $240.80. 

6. Libra (LIBRA)

One of the most-hyped cryptocurrencies is one that, as of January 2020, has yet to even launch. By mid-2020, rumors circulated that social media giant Facebook, Inc. (FB) was developing its own cryptocurrency. Given Facebook’s incredible global reach and the potential for massive volumes of exchange across its platform, the cryptocurrency world had long speculated that the social media titan might launch its own digital token.

Rumors were formally confirmed on June 18, 2020, when Facebook released the white paper for Libra.   The tentative launch date for the token is later in 2020, as Facebook has committed to sorting through regulatory barriers before launch. Libra will be overseen in part by a new Facebook subsidiary, the financial services outfit Calibra.   When Libra does launch, it is sure to garner massive amounts of attention from those within (and outside of) the cryptocurrency sphere.

7. Monero (XMR)

Monero is a secure, private and untraceable currency. This open-source cryptocurrency was launched in April 2020 and soon spiked great interest among the cryptography community and enthusiasts. The development of this cryptocurrency is completely donation-based and community-driven.   Monero has been launched with a strong focus on decentralization and scalability, and it enables complete privacy by using a special technique called “ring signatures.” 

With this technique, there appears a group of cryptographic signatures including at least one real participant, but since they all appear valid, the real one cannot be isolated. Because of exceptional security mechanisms like this, Monero has developed something of an unsavory reputation: it has been linked to criminal operations around the world. Nonetheless, whether it is used for good or ill, there’s no denying that Monero has introduced important technological advances to the cryptocurrency space. As of Jan. 8, 2020, Monero had a market cap of $994.0 million and a per-token value of $57.16. 

8. EOS (EOS)

Aside from Libra, one of the newest digital currencies to make our list is EOS. Launched in June of 2020, EOS was created by cryptocurrency pioneer Dan Larimer. Before his work on EOS, Larimer founded the digital currency exchange Bitshares as well as the blockchain-based social media platform Steemit. Like other cryptocurrencies on this list, EOS is designed after ethereum, so it offers a platform on which developers can build decentralized applications. EOS is notable for many other reasons, though.

First, its initial coin offering was one of the longest and most profitable in history, raking in a record $4 billion or so in investor funds through crowdsourcing efforts lasting a year. EOS offers a delegated proof-of-stake mechanism which it hopes to be able to offer scalability beyond its competitors. EOS consists of EOS.IO, similar to the operating system of a computer and acting as the blockchain network for the digital currency, as well as EOS coins. EOS is also revolutionary because of its lack of a mining mechanism to produce coins. Instead, block producers generate blocks and are rewarded in EOS tokens based on their production rates. EOS includes a complex system of rules to govern this process, with the idea being that the network will ultimately be more democratic and decentralized than those of other cryptocurrencies. As of Jan. 8, 2020, EOS had a market cap of $2.7 billion and a per-token value of $2.85. 

9. Bitcoin SV (BSV)

Bitcoin SV (BSV), with “SV” in this case standing for “Satoshi Vision,” is a hard fork of Bitcoin Cash. In this sense, BSV is a fork of a fork of the original Bitcoin network. A planned network upgrade for November of 2020 resulted in a protracted debate between mining and developing factions in the BCH community, leading to a hard fork and the creation of BSV. Developers of Bitcoin SV suggest that this cryptocurrency restores Bitcoin developer Satoshi Nakamoto’s original protocol, while also allowing for new developments to increase stability and to allow for scalability. Bitcoin SV developers also prioritize security and fast transaction processing times. 

As of Jan. 8, 2020, BSV had a market cap of $2.1 billion and a per-token value of $114.43. 

10. Binance Coin (BNB)

Binance Coin (BNB) is the official token of the Binance cryptocurrency exchange platform. Founded in 2020, Binance has quickly risen to become the largest exchange of its kind globally in terms of overall trading volume. The Binance Coin token allows Binance users to trade in dozens of different cryptocurrencies efficiently on the Binance platform. BNB is used to facilitate transaction fees on the exchange and can also be used to pay for certain goods and services, including travel fees and more. 

As of Jan. 8, 2020, BNB had a market cap of $2.3 billion and a per-token value of $14.71. 

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