Top 5 Cryptocurrencies By Market Cap
Here we take a look at the performance and prospects of the top five digital currencies.
Published on 14 March 2018
The rapid rise in the price of bitcoin and other cryptocurrencies captivated the investing world in 2017. Bitcoin prices skyrocketed from US$998 in January 2017 to US$13,863 by the end of the year.
There was a rush to open new cryptocurrency trading accounts. The number of accountholders on Coinbase, a popular trading platform, rose to over 13 million.
As the craze picked up stream, new cryptocurrency investors jumped on to the bandwagon. According to a recent report, over US$4 billion was raised in Initial Coin Offerings (ICO) to fund new cryptocurrency ventures in 2017. Telegram – the company that provides an encrypted messaging service to 100 million+ users – is reportedly planning a US$2 billion ICO, the largest ever.
But will the cryptocurrency boom last? Here we take a look at the performance and prospects of the top five digital currencies in terms of market cap (as of 12 March 2018).
1. Bitcoin Current
Market cap: US$162 billion
There have been wild swings in bitcoin prices in the recent past. In the middle of December, bitcoin was valued at almost US$20,000 per coin. A little over two months later, its price has tumbled to US$9,600.
Recent news about the cryptocurrency has helped to shore up prices. According to a news report, Peter Thiel, an early investor in Facebook, has a positive view about bitcoin. Founders Fund, the venture capital firm that he helped to set up, had made an investment of U$15 million to US$20 million in bitcoin some time ago. The investment is now valued at hundreds of millions of dollars.
How high will bitcoin prices rise? In December 2016, when bitcoin was valued at less than US$1,000, Kay Van-Petersen, an analyst at Saxo Bank, said that the cryptocurrency would reach US$2,000 in 2017. That target was breached in May.
Now Van-Petersen says that bitcoin could surge to US$100,000 in 2018.
But that’s not an opinion that everybody shares. Jamie Dimon, the chief executive officer of JPMorgan Chase, a financial services giant, says that if you are “stupid enough to buy it” you will pay the price in the future. Warren Buffett, CEO of Berkshire Hathaway thinks that cryptocurrencies are going to have a “bad ending.”
2. Ethereum Current
Market cap: US$71 billion
After hitting an intra-day high of US$1,423 on 13 January this year, ether is now trading at about US$725. Anybody who had invested at a level of around US$1,400 would be staring at a huge loss.
But if you consider a longer timeframe, ether has performed exceedingly well. In January 2017, the cryptocurrency was trading in the range of US$8 to US$10.
Why has ether’s valuation risen so rapidly? The ethereum blockchain will be used by several of the world’s financial institutions to comply with new regulatory requirements. A project named Massive Autonomous Distributed Reconciliation (Madrec) has recently been launched.
Madrec will simplify compliance with the new rules for financial entities that have been implemented in the European Union. The project is led by Switzerland’s UBS, a financial services company, and has participation from Barclays, Credit Suisse, KBC Bank Ireland, Thomson Reuters, and SIX, the European payment services provider.
Mat Greenspan, a senior market analyst for eToro, a brokerage firm, says, “Ethereum is currently the most promising blockchain…” and that it has “by far the most projects being developed on it.”
Current market cap: US$32 billion
Ripple’s coin, XRP, touched a high of US$3.28 early this year, but is now trading at US$0.82. One reason for the cryptocurrency’s popularity is its deceptively low price. Although XRP costs less than a US dollar, there are 38 billion in circulation.
Contrast that with the total volume of bitcoin, which is only 17 million.
Another unique feature of Ripple’s XRP is that in a certain sense it is not a cryptocurrency at all. Ripple Labs, formerly called Opencoin, is a San Francisco-based firm that specialises in providing international payment solutions for global financial institutions.
Unlike, bitcoin, which has to be mined, Ripple simply created XRP and retained 60 billion for itself. The remaining 39 billion XRP trades on the world’s exchanges.
4. Bitcoin cash
Current market cap: US$19 billion
Bitcoin cash is an offshoot of bitcoin that was created in August 2017. The reason that a different cryptocurrency was created was to address the problem of speed that had affected bitcoin transactions.
Vinny Lingham, an internet entrepreneur and the co-founder and CEO of Civic, an identity protection company in San Francisco, says that the demand for bitcoin cash will soon outpace the demand for bitcoin.
According to Lingham, “Bitcoin and bitcoin cash are focusing on two totally different markets right now. When I look at it from the product standpoint, I think the greater demand is for peer-to-peer cash than for digital gold.”
Prices of bitcoin cash have been very volatile since it started trading in August 2017 at US$327. It rose to an intra-day high of about US$3,700 on 21 December 2017 and is now at a level of US$1,109.
Current market cap: US$10 billion
At the beginning of 2017, litecoin was trading at US$4.51. By December, its value had crossed US$300. In fact, it hit an intra-day high of US$375 on 19 December. Today litecoin is trading at US$ 189.
Charlie Lee, a former employee of Google, launched litecoin in 2011. Its features are very similar to bitcoin. In fact, Lee’s objective was to create a cryptocurrency that did not suffer from Bitcoin’s shortcomings. Litecoin transactions are both cheaper and faster than those conducted with bitcoin.
Describing litecoin, Lee says, “The vision is always I wanted litecoin to complement bitcoin – not compete. Bitcoin can be used for like moving millions of dollars between banks, buying houses, buying cars. It’s really secure… litecoin can be used for cheaper things.”
The rapid rise in cryptocurrency valuations has all the hallmarks of a financial bubble. There are 1,556 digital currencies listed on coinmarketcap.com, a website that tracks alternative coins. More are being added on a regular basis.
The surge in price has, to a significant extent, been prompted by frenzied media coverage. This has spurred individuals to register on trading platforms and invest in the hope of making a quick profit. FOMO has undoubtedly played a big part in many cryptocurrency investment decisions.
Will the cryptocurrency bubble burst anytime soon? The next few months may provide an answer to that question.