KEYTAKEAWAYS
- Mainstream coins offer stability and liquidity but slower growth, while altcoins provide higher potential returns with increased risks and diverse applications in emerging technologies.
- Stablecoins maintain value parity with fiat currencies, offering low volatility and utility for trading and hedging, but limited price appreciation potential.
- Memecoins, driven by community consensus, present opportunities for quick, high returns but carry significant risks of scams and sudden price crashes.
CONTENT
Explore the four main types of crypto market coins: mainstream coins, altcoins, stablecoins, and memecoins. Learn their characteristics, advantages, and risks to make informed investment decisions in the cryptocurrency market.
If you’re new to the crypto market, you’re likely to be overwhelmed by the vast array of crypto market coins, unsure where to start.
There are currently over ten thousand cryptocurrencies. How can one choose suitable coins from such a large number of options, and more importantly, find cryptocurrencies that can help make money?
The following article categorizes all crypto market coins into four main types, helping newcomers gain an initial understanding. We believe that after grasping the basic characteristics of crypto market coins, readers will have a clearer direction for subsequent investments.
CRYPTO MARKET COINS TYPE 1: MAINSTREAM COINS
The first type of crypto market coins to introduce is mainstream coins. Among all crypto market coins, these are probably the most familiar and frequently encountered by investors.
There’s no clear definition of mainstream coins, but we generally refer to the top 10 cryptocurrencies by market capitalization as mainstream coins.
The following two indicators can help you identify whether a cryptocurrency is a mainstream coin:
1. Market Capitalization of the Cryptocurrency: As mentioned in the introduction, mainstream coins broadly refer to the top ten cryptocurrencies by market cap. Readers can check third-party information websites (such as Coinmarketcap) to find out who’s currently in the top 10. Usually, cryptocurrencies with large market caps have good liquidity and relative security.
2. Time of Existence in the Cryptocurrency Market: Some coins might surge into the top ten due to short-term speculation, like Dogecoin. So when you see a coin in the top 10, you also need to consider whether it’s there due to recent hype or if it truly has the strength to maintain a top 10 ranking long-term.
Mainstream coins have the following advantages and disadvantages:
Advantages
- Sufficient trading depth and high liquidity, allowing buying and selling at any time
- Due to longer existence in the market, they have experienced more market events and have relatively sufficient coping experience
- Have future development visions and concepts
- Most have practical applications and ecosystem construction governance
Disadvantages
Mainstream coins can be thought of as blue-chip stocks like Apple or FAANG. When the bull market comes, because these coins have such large market caps, it’s hard for major players to push the price up, so the increase is relatively small (about 5-10 times increase in 4 years).
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CRYPTO MARKET COINS TYPE 2: ALTCOINS
The second type of crypto market coins to introduce is altcoins. In fact, altcoins are also called “competitor coins,” meaning they are competitors to Bitcoin, and it’s not entirely a negative term.
Why are they called altcoins? It’s because anyone can copy Bitcoin’s code, modify some parameters, and quickly generate a blockchain, so the concept is a bit like counterfeit goods imitating the original, hence the name altcoin.
But there’s also a saying that they’re called altcoins because only Bitcoin is authentic, and coins developed after Bitcoin, even Ethereum and Binance Coin, are altcoins.
Altcoins have distinctions in size and quality. Usually, altcoins are “better versions” of Bitcoin, used to compensate for Bitcoin’s shortcomings.
Good altcoins: Have practical applications and even receive high praise from major international financial institutions, like Cardano.
Bad altcoins: Used by unscrupulous individuals for money-making schemes, speculation, or even fraud. These types of altcoins have no substantial applications or any technical aspects to speak of. They’re just used for speculation, or even as multi-level marketing or pyramid schemes, asking you to recruit downlines. The probability of fraud for such altcoins is very high.
Investing in altcoins is like investing in small company stocks, with the following advantages and disadvantages:
Advantages
- Once the price starts to rise, profits can be large, possibly reaching several times or dozens of times the initial investment
- Many practical applications, can be used in metaverse, NFTs, etc., with potential for future development
Disadvantages
- Altcoins other than mainstream coins have lower win rates and less certainty
- Many scams, some altcoins have no substantial applications and operate through pyramid schemes or downline recruitment methods
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CRYPTO MARKET COINS TYPE 3: STABLECOINS
The third type of crypto market coins to introduce is stablecoins.
Stablecoins are cryptocurrencies pegged 1:1 to the value of real-world US dollars, which can be seen as “USD stablecoins”. They help us anchor cryptocurrency prices and make it convenient for us to buy cryptocurrencies with fiat currency.
Fiat currency → Buy USD stablecoin → Cryptocurrency
Stablecoins mainly have the following characteristics:
- Low volatility: USD stablecoins are pegged 1:1 to the US dollar value, with almost no fluctuation.
- Can be used as a substitute for fiat currency: When you have USD stablecoins, you can use them as hedge funds and exchange them for fiat currency around the world.
If you choose to invest in stablecoins, you’ll have the following advantages and disadvantages:
Advantages
- Low remittance fees: Cross-border transfer fees are usually expensive, but using blockchain to remit stablecoins is relatively cheap.
- Hedging: For countries with unstable fiat currency exchange rates, investing in stablecoins can help hedge risks, keeping your assets always pegged 1:1 to the US dollar.
- No volatility: No rise or fall, no price difference, can be used for mining to earn interest.
Disadvantages
- No volatility at all: No rise or fall, can’t earn from price differences
- Instability: Some small stablecoins may be unstable due to insufficient collateral
Currently, there are 3 types of stablecoins circulating in the market: fiat-collateralized stablecoins, over-collateralized stablecoins, and algorithmic stablecoins. For beginners investing in stablecoins, it’s recommended to only buy the top 3 – USDT, USDC, BUSD – which have the highest security.
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CRYPTO MARKET COINS TYPE 4: MEMECOINS
Memecoins are also a type of altcoin, but because of their special nature, we categorize them as the fourth type of crypto market coins. Memecoins are formed by a group of people with extremely strong consensus, such as community consensus, Twitter consensus, etc. Usually, memecoins don’t have substantial applications or special application technologies, and are mostly aimed at speculation.
One characteristic of memecoins is that they are dominated by “community consensus,” so any wind of change in the community can cause them to surge or plummet. Another characteristic is that their prices are very low, with many zeros after the decimal point.
For example: One Shiba Inu coin (SHIB) costs only $0.00001384, one Dogecoin (DOGE) is $0.00001384, one Floki coin (FLOI) is $0.00012191, and so on.
Because many memecoins have no issuance limit and have a huge supply, their prices are relatively low. So with just $1, you can buy millions of memecoins.
If you choose to invest in memecoins, you’ll have the following advantages and disadvantages:
Advantages
- Small investment for big returns: When prices start to soar, the increase can reach hundreds, thousands, or even tens of thousands of times, like Shiba Inu coin
- Quick profits: Prices rise rapidly, substantial profits can be made in the short term (1-3 months)
Disadvantages
- Many scams: If newcomers don’t understand, they can easily fall victim to rug pull scams, causing coins to go to zero in an instant, like Squid Game token
- Potential for quick losses: Because these small coins can crash dramatically when they fall, losses can also come very quickly
Currently circulating memecoins include Dogecoin (DOGE), Shiba Inu (SHIB), Floki (FLOI), etc.
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CONCLUSION
In this article, we introduced four types of crypto market coins, each with its unique characteristics and investment risk-return profile:
- Mainstream coins: Top 10 cryptocurrencies by market cap, such as Bitcoin and Ethereum. They have high liquidity and relative stability, but may have smaller increases in bull markets.
- Altcoins: Other cryptocurrencies besides Bitcoin, including quality projects with practical applications and inferior coins purely for speculation. Investment risks are higher, but potential returns are also greater.
- Stablecoins: Cryptocurrencies pegged 1:1 to fiat currencies (usually the US dollar). They have low volatility and are mainly used for trading, hedging, and cross-border payments, but have no room for price appreciation.
- Memecoins: Cryptocurrencies driven by community consensus, usually lacking substantial applications but high in speculative heat. They have extremely high speculation potential, possibly bringing huge returns, but the risks are also very high.
Each type of cryptocurrency has its unique advantages and disadvantages. Investors should choose an appropriate investment portfolio based on their risk tolerance and investment goals.
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