This article will examine the world of Bitcoin and other cryptocurrencies, also known as altcoins, with a view to judge what the top cryptocurrencies in 2018 are.
While the word ‘top’ can be a matter of opinion depending on how it is understood, - one indisputable mathematical measurement of the proliferation of a cryptocurrency is its market cap, or capitalization in full. Market cap is a result of the calculation of the number of units of a cryptocurrency in circulation, multiplied by its exchange rate in US dollars. In this way, we can calculate the scope and value of each cryptocurrency and compare it with others. Don’t forget that as the value of cryptocurrencies is constantly changing, the market cap also needs constant adjustment.
When you buy Bitcoin or any altcoin, you also need to choose an exchange and a wallet that support that particular coin.
Ways To Compare Cryptocurrencies
Market cap
Based on the above, one of the primary ways to compare cryptocurrencies is by market cap. As of today, February 23rd, 2018, the top 5 cryptocurrencies by market cap are Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin. Their holdings are $176 billion, $86 billion, $40 billion, $22 billion, and $12 billion respectively, and together, they account for about 72 per cent of all cryptocurrency in existence. As such, the total market cap of all cryptocurrencies as of today is $500 billion.
Exchange rate
The exchange rate of a cryptocurrency is its price at a particular moment in time as compared with either another cryptocurrency or with a national government currency, also known as fiat currency. This price is adjusted by market fluctuation. Some cryptocurrencies, such as Bitcoin and Ethereum, are very expensive per unit, and others, such as Ripple and DOGE, are very cheap per unit, but have a much larger number of units.
Volatility
When the value of a cryptocurrency (or other investment asset) changes rapidly and unpredictably, the investment is said to be ‘volatile’, which is a term borrowed from chemistry. Most cryptocurrencies are considered volatile when compared with national currencies, such as US dollars, or commodities, such as gold. You may note that cryptocurrencies have a much shorter history than US dollars and gold, and this gives us hope that over time, the volatility of cryptocurrencies will tend downwards. Currently, Bitcoin is the least volatile pure cryptocurrency, with all others changing even more rapidly as a function of their current value.
Privacy
Another metric by which to compare coins is their privacy. When a transaction is logged on the blockchain network, it is possible to find out who the sender and recipient are, and how much was sent. This means that cryptocurrency trades are not usually entirely private, when done with Bitcoin, Litecoin, Ethereum and Ripple. For users who specifically want private trades, it is better to trade with Monero, PIVX, and ZCash.
Correlation with Bitcoin
Finally, you should look at your chosen currency’s correlation with Bitcoin. Since it is well known that most cryptocurrencies tend to follow Bitcoin’s price, when Bitcoin drops, those coins often do too, and when it rises, those coins often rise too, although not as closely as how they dropped.
Since it is easy to download a daily history of any given cryptocurrency’s price, you can download both Bitcoin’s and the chosen altcoin’s daily prices for the last year, and then run a correlation analysis on them. In MS Excel, you do this by means of the “=CORREL(array1, array2)” formula, where you select the cell range of the Bitcoin data for array 1 and the altcoin data for array 2. The output answer will be between -1 and 1, with 1 being a perfect positive correlation, and 0 meaning no relationship. Generally speaking, if the output answer is above 0.7, there is a very strong chance that this altcoin will follow Bitcoin‘s price. If it is below 0.4, then there is likely to be little relationship between them.
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Review: Top Cryptocurrencies of 2018**
If you review the available writings on the top cryptocurrencies of 2018, certain names will come up again and again. Some of those are Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin (the top 5), and others are DASH, ZCash, and IOTA.
On a short –term level
While it has certainly made the news that Bitcoin has fallen far from its stellar heights reached in mid-December of 2017 and is currently closer to $10,000, 2018 has seen some currencies doing surprisingly well. Ethereum, VeChain, NEO, and Lisk are examples of currencies that have strengthened since 2018 began. Therefore, for customers who are interested in short-term gains, these are strengthening currencies.
On a medium-term level
There is a well-known saying in investment – buy low, sell high. If you are optimistic that Bitcoin and Ripple will rise again, as Bitcoin has done three times in the past after a crash, then now, while Bitcoin and Ripple are relatively cheap, might actually be a very good time to buy.
On a long-term level
It may be better to avoid buying anonymous coins, as these could end up being targeted by regulators at some point in the future. Also, it may interest you to know that, while many coins have a finite limit that their creators have pre-programmed so that only a certain number can ever be created, some are not subject to any such limit, and are therefore not guaranteed to eventually become a deflationary currency.
Conclusion
In conclusion, there is no definitive way to say which currency you should invest in. It depends on how long you want to invest for. Once you know this, you need to take the six coin variables into account, based on your individual needs: market cap, exchange rate, volatility, privacy, support from exchanges and wallets, and Bitcoin correlation. These variables should help you decide which cryptocoin best suits your needs, and this is true of any year as much as it is of 2018.