Cryptocurrency has recently been taking over the financial news and getting a lot of attention due to the first and leading cryptocurrency, Bitcoin, going on a constant upward trend and being able to reach the high of $62 thousand in October. Many altcoins (term used to refer to other cryptocurrencies aside from Bitcoin) have also been on an upward trend; take Ether, for example, which has been able to reach a high of $4 thousand from its price of $406 just last year. For these reasons, cryptocurrencies have gotten a lot of attention from interested investors. All keen investors and traders take time into reading news, tips, price predictions and broker reviews. A well-known portal to do this is Big data Europe.
However, you should not limit your knowledge of cryptocurrencies; there are a lot of different types in existence; thus, knowing their types will certainly help you when deciding which to go for when deciding to invest. Through this, you will be able to find better investment options that could probably work better with your financial status and goals, as well as your investment skills.
Bitcoin is the most popular type of cryptocurrency, but when you are investing in cryptocurrencies, knowing about other categories of cryptocurrency is a must, for it can help you gain better investment opportunities, especially if you’ve chosen right one. This article will walk you through the five categories of cryptocurrencies and the advantages of investing in them.
1. Payment coins
Payment coins are primarily used to pay for services or products but can also be used for trades. At the start of cryptocurrencies, platforms were mostly created for payment services such as Ripple (XRP), Litecoin (LTC), and Dash; these crypto were already in existence way before Ethereum introduced smart contracts.
The problem with cryptocurrency assets is their high volatility, so investors who want better liquidity go for stablecoins. Having better liquidity means that stablecoins are much easier to convert to cash than other cryptocurrencies. This is because it is backed by assets such as gold and fiat currencies like Euro and US Dollar; thus, it is a good backup plan if ever the crypto market crashes and you want to exit the market.
However, since they don’t have extreme market fluctuations, they don’t have that much of a profit gain compared to high-risk crypto like Bitcoin. Although, as mentioned earlier, investors mostly go for stablecoins as their backup plan, it is also used to readjust their crypto portfolio’s balance and stability.
3. Security tokens
ETH and BNB are both cryptocurrencies under this category. Utility tokens are used to do transactions on the trading platform and be able to access the Decentralised Applications (DApps). Many blockchains nowadays offer their own utility tokens to be used in their platforms to raise funds as well as the crypto’s market price.
4. Utility tokens
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5. Governance tokens
Governance tokens are considered the upgraded version of utility tokens; they are created by developers in order to allow token holders to govern the future of a protocol in the platform. When you have a governance token of a platform, you will have the right and power to vote on a project and even have a share of the revenue.
Whatever kind of cryptocurrency you invest in, the success of your crypto investments all lies in your effort and hard work on conducting research to have the necessary knowledge so you can apply the right strategy as well as figure out how everything works out before even investing so you won’t lose your investment just because of your unawareness.