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Cryptocurrency Networks: Bitcoin, Ethereum, and Everybody Else

Posted on Monday, November 4th, 2019 by Steve Anderson

For those who have been considering getting into—or perhaps more into—the cryptocurrency market, it's likely been a long and confusing journey. Maybe you're one of those who mortgaged their house to buy Bitcoin back around its top of roughly $19,000. Maybe you're one of those who have been in for a while and you're trying to ascertain whether to get out while the getting's good or to follow that great cryptocurrency investment principle: Hang On for Dear Life (HODL). Maybe you're just considering buying your share of this wild and uncertain pie. The good news in all this is that making sense of the cryptocurrency market is easier than you think because it all boils down to three critical overarching themes.

Bitcoin

Bitcoin is the ur-crypto, the origin point from which all other cryptocurrencies descend. Currently the highest-valued cryptocurrency and holder of that title for the last several years, Bitcoin is the cryptocurrency that most believe will be the ultimate cryptocurrency, the one that will ultimately prove to be the basis of major operations like cross-border mobile payments. It's been described as the progenitor of “global, state-free money”, and even as an analog for gold.

It's also the cryptocurrency that at once has the greatest reputation, by virtue of it being around the longest—the fact that it hasn't yet folded up and vanished in a cloud of lost investor value does wonder for its reputation—and also has the most skepticism around it, often seen as a vehicle for criminals and speculative investors.

What Are Cryptocurrencies?

Ethereum

Ethereum has commonly been called the silver to Bitcoin's gold, and that's not just a reference to price ratios. The price ratio comparisons are valid, to a certain extent, but there's also the matter of use cases. While Bitcoin is often seen as the more reliable cryptocurrency by virtue of its longevity, especially amongst the laity of investors, the technology that supports Ethereum is considered on several fronts superior to that of Bitcoin.

On a certain level, this makes sense—after all, Bitcoin is quite a bit older than Ethereum as Ethereum got its start back in July 2015—but it also means that Ethereum has more use cases than Bitcoin. That makes Bitcoin much more like gold, which has some industrial and other uses, but nowhere near so much as silver, which is found in a range of technological, medical, and other operations. Silver also has a fraction of gold's value, due to its broader availability, which is also similar to Ethereum. There will only be 21 million Bitcoin to ever exist, while Ethereum's cap is effectively unlimited, with over 96 million in circulation at the end of 2017.

Everybody Else

The third bloc is devoted primarily to so-called “altcoins”, which is essentially a portmanteau of “alternative coins”. Some of these are alternatives to Bitcoin, and others are alternatives to Ethereum, depending on their underlying technology. As of July 9, there were roughly 2,320 such altcoins around, each comprising a different value proposition. Some, like dogecoin, traded on the strength of their community and their value as a meme, while others traded on greater availability or upside potential.

What All This Means to the Crypto Investor

The good news about this market is twofold: one, there are a lot of options here, and two, the market is still very young. Ethereum will celebrate its fifth birthday next July. Bitcoin's primacy is a thing of recent days, its $19,000-tier highs celebrated in late 2017. We've seen wild swings in the market as it demonstrates its volatility and a flood of new entrants.

While it's likely too late for anyone to cash in on the same kind of mania that drove Bitcoin's value from the now-legendary SmokeTooMuch auction that featured 10,000 Bitcoin selling for a starting price of $50—no takers—to the heights of around $19,000 per, there is still plenty of hope for much more rational highs.

Additionally, with the sheer quantity of choices in the field, potential investors can tailor their choices precisely to their circumstances. Want to invest only a certain amount, like $500 or less? An entire portfolio can be made on that. Since coins can also be fractionally purchased, a $500 Bitcoin portfolio is just as possible.

 

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