Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.
Cryptocurrencies are a type of digital money that, unlike traditional currencies, are not controlled by a central bank.
As of June 20, 2022, there were more than 20,000 crypto projects, with a total market capital of $883 billion. There were also (and continue to be) quite a few crypto platforms where you can buy these tokens. (Wealthsimple is one of them 👋.)
While we can’t tell you which coins are the best to invest in — no one can! — we can tell you about the biggest options, in terms of market cap. Size isn’t an indicator of future performance, of course, but it does show you which coins other investors seem to trust.
We also can’t tell you which crypto platform to use. But we can tell you how different types of platforms work. From there, you can pick the one that feels the best for you.Buy and Sell Bitcoin, Ethereum, and over a dozen other cryptocurrencies with Wealthsimple. Sign up and Trade here.
The top cryptocurrencies
With a total market cap of $132 billion, Ether is less than half of Bitcoin’s $386 billion, but it does something that Bitcoin cannot: power decentralized applications (dApps).
Decentralized applications function on a blockchain or peer-to-peer (P2P) network of computers rather than a single computer. Many are developed on the Ethereum platform, which can be used for various functions, such as gaming, social media, and banking.
Large banks, such as Santander, have tried Ethereum-based financial products such as ETH-based mortgages and are now expanding their financial offerings based on blockchain technology by launching crypto-backed loans in Argentina. French gaming company Ubisoft uses it for virtual trading cards. And Dutch bank ING uses it for a variety of blockchain-based financial products.
The next two largest coins — Tether and USD Coin — are a little different. They’re both stablecoins: tokens that either by large reserves or other means are meant to avoid the volatility of crypto. They allow users to engage in decentralized finance without exposing themselves to the same currency risk.
Stablecoins are typically tied to (or pegged to) a fiat currency or an asset like gold. In the case of Tether and USDC, that’s the U.S. dollar. (Although Tether originally claimed to have one dollar held in reserve for every tether coin, there’s been some controversy there, as this proved not to be the case.)
BNB (or Binance Coin), the fifth-largest cryptocurrency, is the native token of a crypto trading platform called Binance. BNB is used to facilitate the exchange of one currency for another. When you want to trade a token, many platforms have to find another entity to make that trade with you. But Binance uses pools of trading pairs. For example, if you wanted to trade ETH for SOL, you would find that trading pair on Binance, deposit your ETH, and take out the corresponding amount of SOL. Tokens can always be traded as long as the pool contains corresponding tokens. BNB can be traded in more than 300 different trading pairs on over 120 different trading platforms.
How to trade cryptocurrencies
There are four main options for trading crypto.
The first type of venue is called a “brokerage” service. On crypto brokerages (Wealthsimple is one of these), you buy and sell from an intermediary.
Some of these brokerages let you take your cryptocurrency off of the platform and move it around the crypto economy, sending to whomever you please or trading them on a crypto trading platform. Others only allow you to buy and sell crypto directly within the app.
These platforms are useful for traders whose interest in cryptocurrency is solely for investment. They’re also nice and easy: if you want to start trading crypto, all you have to do is create an account, deposit cash for making trades, and then buy the coins you want.
Some brokerages (👋 us again!) are regulated and insured, although many aren’t. If that sort of thing is important to you, make sure you check with the platform before signing up.
Centralized platforms account for most of the crypto trading volume. They maintain an order book of buyers and sellers. For an easy comparison, they’re the crypto equivalent of stock trading platforms.
Centralized platforms offer numerous digital currencies and often support trading of more complicated financial products, such as futures trading and leveraged trades. Accordingly, they’re a little more advanced than brokerages, and the learning curve is comparatively steep. They come with their own fee structure, incentives, and insurance policy.
Decentralized crypto trading platforms
Decentralized crypto trading platforms are similar to centralized platforms, but they’re noncustodial, which means they don’t hold your crypto for you. You have to do it yourself by getting your own crypto wallet. One reason many people like personal custody like this is that you have full control over your crypto. Even if the platform you bought it on goes belly up or gets hacked, you still have your money.
Another advantage: while centralized platforms and brokerages list only a select number of tokens, decentralized platforms can list whatever they want. This does mean coins aren’t at all proven or vetted, which can be a disadvantage to some investors, but some people may see this as an good thing, since it’s a completely free market.
Instead of an order book that fulfills trades, decentralized exchanges ask other users to offer up their holdings for trade in exchange for rewards.
Peer-to-peer trading platforms
Peer-to-peer (or P2P) platforms function like primitive cryptocurrency trading platforms. Instead of a slick matching engine that would give the Toronto Stock Exchange a run for its money, peer-to-peer platforms contain lists of crypto traders looking to buy or sell cryptocurrency, often for cash. There are a couple of benefits.
First, traders can operate with a higher degree of anonymity than on regular cryptocurrency platforms, where you are required to provide proof of your identity before the transactions are executed. Some peer-to-peer sites ask no questions. They are very popular as a way of trading cash for crypto without government involvement.
Second, P2P platforms are often cheap. The service of a fancy matching engine, the convenience of crypto brokerages, or the self-sovereignty of the decentralized trading platform all come at a price. Peer-to-peer platforms, often little more than dressed-up versions of a crypto Craigslist, are far cheaper to run and, thus, may net you the best deal for one-off trades.
How to select cryptocurrencies
Digital currencies are high-risk, high-volatility investments. Pick any of the major coins and you’ll find holders of each that can share a story of wonder and a tale of woe.
Before you invest in any cryptocurrency, it is wise to research the project. Details about the coin are often described in whitepapers or blog posts. Investors congregate on social media sites such as Reddit, Telegram, Twitter, and Discord, and if it’s an early-stage project, its creators might even be happy to walk you through the details.
The larger cryptocurrencies by market cap have more established communities and a richer history. However, they are not necessarily less volatile. The price of bitcoin, for instance, was cut in two when markets buckled amid the economic uncertainty caused by the coronavirus in March 2020. By October of the same year, its price had tripled. Two years later, after hitting an all-time high of $69,000 in November 2021, bitcoin’s price fell to less than $20,000 in June 2022.
How to select a trading venue
Determining the best place to trade cryptocurrency depends on your investment strategy.
If you’d like to buy and sell crypto, but don’t want to bother with any of the more advanced trading strategies, then crypto brokerages like Wealthsimple are a fine way to go. They’re often integrated with trusted financial products you already use, like new challenger banks and robo-advisors.
Buying and selling is usually as easy as clicking a button. However, in some cases, you might be limited to just a handful of cryptocurrencies, often just bitcoin and ethereum. Plus, you usually can’t move your crypto out of your wallet — that limits you from participating in the broader crypto economy.
If you’d like access to the broader, more experimental crypto market, and would prefer to trade less well-known tokens, try decentralized platforms.
Frequently Asked Questions
A crypto trading platform is where you can buy and sell digital coins like bitcoin (BTC), ethereum (ETH), cardano (ADA), and litecoin (LTC). A cryptocurrency trading platform executes buying and selling orders by matching buyers with sellers. When the process is completed, charge a small fee for it. Unlike the old days, you don’t have to find another person willing to buy/sell digital currencies — crypto trading platforms do that for you quickly and cheaply.
Nearly all well-reputed crypto trading platforms use different measures to tackle online attacks and prevent loss of crypto, but before choosing one, make sure to do your own research. Some exchanges, including Wealthsimple, have various security features that you can activate to minimize the risks and protect your crypto from hackers. Although to minimize risks, you should always use some form of two-factor authentication to secure your account.
The three types of crypto trading platforms are centralized trading platforms (CEX), decentralized trading platforms (DEX), and hybrid trading platforms (HEX). Centralized crypto trading platforms are the most common types. Controlled by a larger company, they allow you to trade cryptocurrencies either with fiat or crypto. Decentralized crypto trading platforms, which aren’t run by a larger company, offer trades executed using “smart contracts” and don’t let you buy and sell crypto using fiat currencies. Hybrid trading platforms are the combination of both centralized and decentralized trading platforms, taking the best from both platforms. These types of trading platforms are still under development but considered to be the “next generation” crypto trading platforms.
Cryptocurrencies can be divided into four different groups: store of value cryptocurrencies (mostly used for payments) like bitcoin and dogecoin; infrastructure cryptocurrencies (which allow programmers to make dApps) like ethereum and cardano; stablecoins (coins which are pegged to a fiat currency or asset) like tether and USD coin; and privacy coins (users’ identities and other transactional information that could be used to identify them are obfuscated) like monero and zCash.
As of June 20, 2022, according to the daily transaction volume, the top 10 most traded cryptocurrencies are tether (USDT) with $57 billion volume, bitcoin (BTC) with $36 billion volume, ethereum (ETH) with $22 billion volume, USD coin (USDC) with $5.7 billion volume, binance USD with $5.1 billion volume, solana (SOL) with $1.9 billion volume, bitcoin cash (BCH) with $1.6 billion volume, litecoin (LTC) with $1.38 billion volume, and binance coin (BNB) with $1.33 billion volume.
According to the market capitalization as of June 20, 2022, the most popular cryptocurrencies are bitcoin (BTC), ethereum (ETH), tether (USDT), USD coin (USDC), and binance coin (BNB). Keep in mind, cryptocurrencies are risky and speculative. This is why most crypto experts recommend that you understand all the risks before stepping into the crypto world.
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