Bitcoin is the first and the most famous cryptocurrency among more than 2000 cryptocurrencies available for purchasetoday.
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 arequoted in Bitcoins, therefore Bitcoin fulfills the role of a base currency inthe 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-tradingis 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.
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 minersthemselves.
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 bymid-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 forinvestors favoring transactions, compared with Bitcoin, which could bepreferred for digital investment.
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 scriptinglanguage.
In addition, Ether accounts are pseudonymous, hence provide more privacy to its users.
Also, for users who are willing to makemore 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 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’ incomparison to Bitcoin’s gold.
As all cryptocurrencies, Ripple offers a blockchain solution for global payments.
But among major cryptocurrencies, Ripple isthe one that faces the biggest controversies, especially from the community ofpurists, 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.
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.
Senior Market Analyst