Top 5 Cryptocurrencies By Market Cap

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Top 5 Cryptocurrencies By Market Cap

Cryptocurrencies are shaking up the global financial system and becoming one of the hottest trends in the investing world. Here we take a look at the five biggest cryptocurrencies in terms of market cap.

Published on 23 October 2017

Blockchain technology has led to the development of hundreds of new cryptocurrencies. These currencies – which are also known as digital or virtual currencies – are rapidly gaining traction across the world. To understand the impact that bitcoin, the first virtual currency, and others of its ilk have had, consider the following:

  • The total market capitalisation (market cap) of all cryptocurrencies currently stands at around US$172 billion. As of October 2017, 1,175 digital currencies have been established.
  • Initial coin offerings (ICOs), the fundraising mechanism by which new digital currencies are launched, are attracting great interest from investors. A total of US$3 billion has been raised from ICOs, with over US$1 billion of that sum being raised in the last month alone.

Blockchain, the cryptocurrency backbone

What exactly is blockchain technology and how has it contributed to the development of cryptocurrencies? Blockchain is a decentralised ledger of the digital currency’s transactions. Unlike a normal fiat currency, which has the backing of a government, cryptocurrencies are created online and validated and monitored by users.

Each “block” in the blockchain records a certain number of recent transactions and then forms part of the permanent database that resides on the computers in the network. There is no central authority that monitors the cryptocurrency. Instead, all information on transactions is dispersed throughout the computer network, and is maintained in a manner that is tamperproof, but which permits verification.

A fad, fraud, or the future of money?

A year ago bitcoin was trading at US$628. Today a bitcoin is worth around US$6,021 – that’s a nine-fold return in a year.

Ethereum, another major digital currency, has done even better. Just 12 months ago, an ether token was available for US$11.75. A year later, its value has ballooned by a factor of around 26 to US$293.49.

Why are cryptocurrency prices rising so fast? Unfortunately, nobody really has a clear answer. One explanation that is doing the rounds is that digital currencies may serve as an alternative to fiat currencies. The total amount of money in the US is US$13.5 trillion. This figure includes cash, deposits, money market securities, and mutual funds. The current market cap of cryptocurrencies is only a small fraction of this amount, indicating that there is still a lot of scope for further price appreciation.

But not everyone is convinced that cryptocurrencies can replace real money. In fact, many believe that these currencies have highly inflated values and that they may not be around for much longer.

One prominent critic of the most established cryptocurrency, bitcoin, is JPMorgan Chase chief executive officer Jamie Dimon, who recently called bitcoin “a fraud”, adding that “It’s just not a real thing, eventually it will be closed.”

Jamie Dimon is not the only one who thinks that digital currencies are a bubble waiting to burst. Robert Shiller, an American economist who won the Nobel Prize in 2013, thinks that Bitcoin is “a fad” that will vanish soon.

But meanwhile, ICOs remain very popular and the market values of existing digital currencies continue to climb to new heights.

Here we take a look at the world’s five largest cryptocurrencies in terms of market cap:

01.

Bitcoin
Market cap: US$100 billion

Bitcoin was created in 2009 by “Satoshi Nakamoto” (the pseudonym used by the unknown person who invented the bitcoin protocol) and it currently accounts for more than 50% of total cryptocurrency market cap. In the past fews days, bitcoin rose above the US$6,100 mark for the first time, reaching US$100 billion in market cap.

Bitcoin is beginning to gain acceptance from established financial services firms. Recently, Fidelity, an investment company based in Boston, has started allowing clients to view their bitcoin holdings on its website. Goldman Sachs may soon start trading bitcoin and other digital currencies on behalf of its clients. Saxo Bank recently added two new bitcoin exchange traded notes to its offering, allowing its clients to gain exposure to the cryptocurrency.

In August this year, the bitcoin blockchain split into two. Everybody who owned bitcoin received an equal amount of bitcoin cash, an offshoot of bitcoin that is effectively a new cryptocurrency. Bitcoin cash currently trades at about US$331 and has a market cap in excess of US$5.5 billion.

Why did the split take place? As the original bitcoin grew in popularity, transaction speeds declined. The “blocks” in bitcoin cash’s blockchain are larger in size. The new currency permits faster payments and lower fees. Some analysts, however, predict that bitcoin cash will not survive as the currency faces several technical issues.

02.

Ethereum
Market cap: US$28 billion

While bitcoin is the protocol behind the digital currency, ethereum is very different – it is a decentralised software platform. The technology that underpins ethereum – and generates the cryptocurrency token called “ether”, which was launched in 2015  – can actually be used to build new programmes. An organisation called Enterprise Ethereum Alliance has recently been established. Its members include Fortune 500 companies, startups, academics, and technology vendors, and its stated goal is to utilise blockchain technology to develop software for business applications.

Ethereum co-founder Vitalik Buterin – a 23-year-old Russian who currently lives in Singapore – predicts that in a couple of years, ethereum’s blockchain network will achieve “Visa-scale” capacity.

03.

Ripple
Market cap: US$7.8 billion

Chris Larsen and Jed McCaleb founded ripple, which is a cryptocurrency and a digital payment network, in 2012. The currency, ripple, is also referred to as “XRP”.

While ether and bitcoin can be mined, the process by which additional units of the currency are created online, the only way to acquire XRP is to buy it from an exchange.

Many observers think that ripple has the potential to disrupt the manner in which international payments are made. Banks take days or even weeks to make an international remittance, and are also quite expensive. Using ripple’s blockchain technology, it is possible to transfer money in seconds at a fraction of the cost that most banks charge.

04.

Litecoin
Market cap: US$3 billion

Founded by former Google employee Charlie Lee in 2011, litecoin is a peer-to-peer internet currency built on blockchain technology that is often referred to as “silver to bitcoin’s gold.”

The main difference between litecoin and bitcoin is the speed of transactions. A bitcoin transfer can take about a 100 minutes. This is because each transaction goes through a six-stage validation process. Litecoin transactions are much faster, taking just two minutes.

Another significant difference between litecoin and bitcoin is that the former is able to accommodate more total coins. The total number of bitcoins is capped at 21 million, while litecoin can have up to 84 million litecoins. There are currently 16 million bitcoins and 53 million litecoins in circulation.

05.

Dash
Market cap: US$2 billion

Dash got its start in 2014 as “Xcoin”, a cryptocurrency that was designed to be an improved version of bitcoin. It soon changed its name to “darkcoin” and then finally settled on “dash” in March 2015.

Unlike bitcoin transactions that could take well over an hour to confirm, dash is much faster, with transfers getting completed in seconds. At the beginning of the year, dash was trading at US$11.23 a coin. It is currently priced at US$296.

The bottom line

Are digital currencies here to stay or are they a fad that will soon disappear? Nobody knows for sure. While bitcoin and a few others may survive, it is highly unlikely that there will be a need for thousands of virtual currencies. A shake-out can be expected at some point in the future, and some of those who have invested in ICOs may get burned when this happens.

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