Information Distribution Problem
In this model, inputs balance with outputs creating a dynamic contribution.
Cryptocurrency Types: Which to Choose for Professional Trading?
Disclaimer: all the following suggestions are for educational purposes only. They can’t be considered investment advice. Remember that the crypto market is volatile and each trader is solely responsible for any consequences of his/her activity.
There’s no secret to experienced crypto followers that assets are pretty diverse. From the very first Bitcoin focused on payments only to developers-oriented Ethereum tokens to stablecoins like USDT backed with United States dollar, there are numerous investment opportunities. How not to get lost in this variety? Sit back and enjoy as we’re going to unveil five crypto types and their value for professional traders.
And, yeah, some info may look pretty basic but it’s never too late to remind key concepts.
Bitcoin and Altcoins
Firstly, there are two pretty unequal categories. The first one is, well, Bitcoin only. One coin with a capitalization of $210+ billion out of $300+ billion-sized global market. Impressive, huh? Because Bitcoin is the first and, now, the largest cryptocurrency, all other projects are opposed to it. Thus, they are altcoins.
Ethereum is the best of the rest today as it has a market cap of $22 trillion and market dominance around 8% compared to almost 70% of Bitcoin. However, currencies outside the top 10 feature 14% which mean small altcoins’ number is rising. Smart investors can benefit from it by recognizing prospective projects.
Ideas for pro traders: BTC/USD pair is the gold classic favored by many traders regardless of their strategies. It suits day traders, swing traders, trend followers, etc. Still, scalpers should opt for more volatile fresh assets that fluctuate strongly. For HODLers, it’s better to diversify the portfolio by adding not only BTC but also reliable alts.
Coins and Tokens
Well, what about exact types of cryptocurrencies by purposes? Bitcoin-altcoin divergence is more symbolic. Wherein, real usefulness rules the world as it’s said that coins with high applicability have more chances to succeed. In a nutshell, there are coins (used as payment asset), stablecoins (a fiat-backed store of value), and tokens (used as in-system currency at blockchain ecosystems). Let’s talk about them.1. Payment Coins
The first type introduced to crypto enthusiasts by developers. Actually, Satoshi Nakamoto conceived Bitcoin as a next-gen worldwide payment system. According to the idea, payment coins should be used to pay for different goods and services, send money transfers without high international fees, and so on. Users also can pay with other types but payment coins feature the highest adoption.
Examples of payment currencies:
Ideas for pro traders: despite payment crypto systems include BTC, they aren’t the most impressive projects now. The world features a few traditional payment processors so why it’d need more crypto-based ones? Thus, investors, we can suggest getting only top-capitalized coins with high real-world usage.2. Privacy Coins
This type focuses on the prevalent idea of personal privacy. In different blockchains that issue these coins, a lot of info is visible to actual participants of each deal but not to side spectators. Privacy coins are used for secure payment transfers and data exchange hidden from third parties.
Ideas for pro traders: it’s better to stay away from these assets. Only Monero entered the top 10 recently but it has not as bright future as tokens. Privacy coins often are associated with illegal activity while the crypto community moves toward a transparent global ecosystem without crimes.3. Utility Tokens
Unlike coins, these assets serve not for payments, mainly. With them, users can create applications, pay for cloud storage space or computing power, promote their content throughout the Internet, track digital identity, and more, and more. Precisely, utility tokens are the ones that fail the Howey test, i.e. can’t be considered securities. Thus, they aren’t investment options, officially.
Talking about types of utility tokens, we can distinguish two large points:
Development platforms. Allow participants to build or use decentralized applications via native tokens. Include such giants as Ethereum and EOS.
Exchanges. Trading platforms also issue their own coins to provide discounts for users, for instance. Binance Coin, Huobi Token, and OKB are the famous ones.
Other purposes are possible, too. They vary from digitals services such as online advertising (Basic Attention Token) to supply chain management (Waltonchain). It’s cool that developers can create a token for almost any process.
Ideas for pro traders: utility tokens look the most promising type for investment and trading. They can quickly burst in value depending on the level of adoption. Hence, the key challenge here is to spot useful tokens before thy skyrocket. Crypto users should conduct thorough research to invest in profitable assets, obviously.4. Security Tokens
Tokens that pass the Howey test are considered digital securities and must be regulated accordingly. In the US, SEC pays high attention to them. So, only accredited investors can purchase and sell them just like real securities. Each token represents a specific physical asset like stocks or dividends. This model enables new trading ways.
Ideas for pro traders: with security tokens, traditional investors can enter the crypto market and crypto traders can get access to real-world markets. There are even tokens for stocks of private companies like SpaceX. For professionals who want to diversify the portfolio, we strongly suggest this type. For traders, it may be not as useful.5. Stablecoins
According to the name, stablecoins focus on stable price all the time. To make this possible, the projects link to less volatile assets like fiat currencies. In fact, there are two main types of stablecoins:
Backed by fiat. Traditional projects connected to fiat currency rates. The most popular base is USD but other top currencies like EUR and JPY are used, too.
Backed by crypto. Sounds a bit recursive but, yeah, these coins use other cryptocurrencies as support. The brightest example is Dai backed by ETH.
Overall, stablecoins can be backed by almost any asset with lower volatility than cryptocurrency. For example, there are dozens of gold-backed things like AurumCoin with precious metal stored in real vaults around the world or Sharia-compliant OneGram with gold in Dubai airport. Other projects may combine stable assets, e.g. Kinesis that combines gold and silver or Swiss Darico backed by gold, BTC, and ETH.
Moreover, there are even seigniorage-style currencies backed by nothing but governmental power. It’s not recommended to touch them at all.
Ideas for pro traders: stablecoins are great as protection from price falls. Investors can easily convert their crypto positions into stable fiat-backed coins to protect from volatility. It’s also more convenient for traders to use USDT as an alternative of digitally-stored real dollars because top exchanges support USDT but not USD, for example.
Building Your Portfolio
At the end of the day, professional crypto traders should already know their preferred tokens and coins. Some investors prefer sticking to one or two pairs. Others try to diversify as much as possible. There are no ultimate rules for magic enrichment because crypto trading requires patience and hard work.
We only can give one last suggestion: get rid of unnecessary manual activity. Use automation platforms. Say, crypto trading software like Superorder provide traders with a one-stop place to trade at different exchanges. Users are free to choose their favorite crypto types and the terminal places orders, watches for prices, and executes strategies.
The Information Distribution Problem
By selectively designing the following technologies, a global system of education based on the validity of information is establishable.
Blockchain(s) Personal & PublicSimulated/Augmented RealityDigital Textbook/Interactive CompendiumArtificial IntelligenceVirtual Mentorship Program(s)