Ipek Ozkardeskaya
Swissquote Bank Ltd
Bitcoin is the first and the most famous cryptocurrency among more than 2000 cryptocurrencies available for purchase today.
Created in 2009, Bitcoin has been the pioneer of the new-born crypto market and early holders have benefited from an impressive rally in Bitcoin’s price.
Undoubtedly, Bitcoin is the most popular and the most trusted cryptocurrency in the market. All crypto-exchanges offer the possibility to trade spot Bitcoin.
Furthermore, most cryptocurrencies are quoted in Bitcoins, therefore Bitcoin fulfills the role of a base currency in the crypto market.
More interestingly, Bitcoin is also available on conventional futures market. Bitcoin futures could be traded on CME and CBOE (Chicago Board Options Exchange).
Although the main purpose of crypto-trading is to enhance holdings in terms of Bitcoins, it is possible and recommended to diversify investments across cryptocurrencies to decrease the volatility and temper risks of a portfolio.
In this respect, some of the major rivals of Bitcoin offer interesting alternatives for traders.
Bitcoin Cash (BHC)
By construction, Bitcoin transactions are included on a blockchain and the set of rules by which the memory of transactions move is determined by the miners themselves.
If some miners would like to change the rules, they need to fork it. As such, a group of miners decided to apply different rules to validate a transaction by mid-2017. It gave birth to Bitcoin Cash in August 2017.
Bitcoin Cash was designed to increase the Bitcoin’s capacity crunch by larger blocks, allowing more transactions to be processed. As such, BHC is more adopted for investors favoring transactions, compared with Bitcoin, which could be preferred for digital investment.
Ethereum (ETH)
Ether is the second largest cryptocurrency after Bitcoin in terms of market capitalization; it is generated on Ethereum platform.
As Bitcoin, Ether is based on blockchain technology and provides a public distributed ledger for transactions.
What makes Ether more appealing is the possibility to run numerous computer applications on it, such as a file-storing application, and its ‘smart contract’ functionality, which is a scripting language.
In addition, Ether accounts are pseudonymous, hence provide more privacy to its users.
Also, for users who are willing to make more transactions, Ether is a better alternative than bitcoin. As a comparison, Ether’s blockchain time, time needed to complete a transaction, is about 15 seconds, versus around 10 minutes for Bitcoin and Bitcoin Cash.
Litecoin (LTC)
Litecoin is the fifth largest cryptocurrency in terms of market capitalization. It has been inspired by Bitcoin. But it has several technical differences compared to Bitcoin.
Litecoin offers its users faster transactions (block time of 2.5 minutes), higher maximum number of coins and a slightly different graphical user interface (GUI).
Litecoin is referred to as ‘silver’ in comparison to Bitcoin’s gold.
Ripple (XRP)
As all cryptocurrencies, Ripple offers a blockchain solution for global payments.
But among major cryptocurrencies, Ripple is the one that faces the biggest controversies, especially from the community of purists, because Ripple is a privately-owned company, hence it is no longer decentralized.
Ripple’s network consists of participating financial institutions. An advantage could be the Ripple’s compliance with the existing financial system. This feature could help Ripple to evolve in a different direction in the future.
It is important to remember that Ripple differs fundamentally from other cryptocurrencies, which aim to replace the actual financial system by spreading the power to a community of users, leaving central banks and financial institutions behind.
Diversification
Although the correlation among cryptocurrencies remain high due to a relatively elevated systemic risk, a diversified portfolio tempers the impact of daily price swings.
As the market becomes more established, the benefits of diversifications will be crucial for a proficient management of mid-to-long term risks.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD softens to near 1.3600 as BoE hints further rate cuts
The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold eyes acceptance above $5,000, kicking off a big week
Gold is consolidating the latest uptick at around the $5,000 mark, with buyers gathering pace for a sustained uptrend as a critical week kicks off. All eyes remain on the delayed Nonfarm Payrolls and Consumer Price Index data from the United States due on Wednesday and Friday, respectively.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Top Crypto Gainers: Aster, Decred, and Kaspa rise as selling pressure wanes
Altcoins such as Aster, Decred, and Kaspa are leading the broader cryptocurrency market recovery over the last 24 hours, as Bitcoin holds above $70,000 on Monday, up from the $60,000 dip on Thursday.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.
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