These days, practically everyone has heard of Bitcoin. But did you know that Bitcoin is hardly the only cryptocurrency? According to the website Cryptocurrency Market Capitalizations.com there are – or have been – more than 1,500 cryptocurrencies in existence. Collectively, they have a total market capitalization of nearly $500 billion. Now to be fair, most of them are barely out of the starting gate. But there are three cryptocurrencies to watch that aren’t bitcoin.
True enough, Bitcoin has been grabbing all the headlines, with the dramatic rise in its price tipping out nearly $20,000 late in 2017. More recently, the price has settled at right around $8,000 mark. But naturally, that kind of price activity generates a lot of attention. Some are claiming Bitcoin is the wave of the future. Others are confidently predicting it’s nothing more than a flash in the pan – the latest speculation du jour, destined to fade into the dustbin of history.
There’s no way to know exactly what the future of cryptocurrencies will be. But what is clear is that the blockchain technology behind them is here to stay. The applications for the technology seem limitless in its use for business, commerce, and communications.
But while we’re at it, it does seem that the currency use of the technology has value as well. The dramatic expansion of e-commerce on the Internet is crying out for new and revolutionary payment methods. Cryptocurrencies are fast moving in that direction.
That alone should ensure the continued progress of cryptocurrencies. Whether that’s Bitcoin or one of its many worthy challengers remains to be seen.
But let’s take a close look at Bitcoin’s three most likely successors: Ethereum, Litecoin and Ripple.
Much like a stock symbol, Ethereum goes by the abbreviation “ETH”. Perhaps that’s in preparation for its widespread adoption as a currency, similar to the abbreviations used for traditional currencies, like the US dollar (USD), the euro (EUR), the Japanese yen (JPY), the British pound (GPB) or the Canadian dollar (CAD). Never wait till the last moment to go mainstream, right?
Generally speaking, Ethereum is the second best-known cryptocurrency, after Bitcoin. And the second most widely traded. That’s no small accomplishment. While Bitcoin came into existence in 2009 as the very first cryptocurrency, Ethereum wasn’t born until 2015. That took place in Switzerland, and the crypto has since split into two separate currencies, Ethereum (ETH) and Ethereum Classic (ETC). Ethereum Classic is actually the continuation of the original.
Individual Ethereum is actually referred to as ether, which is what is generated on the Ethereum platform. Much like Bitcoin, it is a decentralized, Internet-based currency. When it was launched, 11.9 million “pre-mined” coins were issued. However, as of January 2018, the current supply is 98 million. But unlike Bitcoin, which has a maximum number of units issued of 21 million, Ethereum has no ceiling on the number of coins that can be issued.
As is typical with cryptocurrencies, Ethereum operates on a blockchain. That’s a continuously growing list of records, referred to as “blocks”. The blocks are linked and secured using cryptography. The blockchain is an open distributed ledger recording transactions between two parties. The transactions are thus verifiable and permanent.
But this is just a brief and oversimplified version of how blockchain technology works. If you’re reading this article, you’re probably most concerned with the investment potential of Ethereum. And that’s been an exciting road.
Investing in Ethereum
Ethereum is currently trading at $450, with a total market capitalization of over $48 billion To put that in perspective, Ethereum opened on August 7, 2015, at $2.83. It bounced around and moved gradually higher in 2017. An all-time price peak of $1,396 was reached on January 13, 2018.
Will it retrace to the high, and go beyond? Ethereum hasn’t been around long enough to determine predictable price patterns. But it’s clearly being driven by speculation, so anything is possible.
If you want to buy Ethereum there are a number of cryptocurrency exchanges where you can do so:
In order to make a purchase, you need to use a credit card, debit card, or a linked bank account. The exchanges also charge a small fee for both buying and selling the currency. Those fees vary based on the exchange. But here are the fees for Coinbase for US-based customers:
- With a US bank account: 1.49%, with a $0.15 minimum
- Coinbase US Dollar Wallet: 1.49%
- By credit or debit card or PayPal: 3.99%
Obviously, the least expensive way to trade Ethereum is by setting up a US Dollar Wallet with Coinbase. But an even less expensive way is to obtain the currency through trading with people and merchants who use it as a form of payment.
Like other cryptocurrencies, Litecoin (LTC) is also an open source global payment network. It was founded in 2011, and operates as a peer-to-peer Internet currency. Ironically, a big part of the reason for the founding of Litecoin was to remedy certain weaknesses in Bitcoin.
The maximum supply of Litecoin is 84 million, with 56 million currently already circulating. That’s four times as many units as Bitcoin has, but Bitcoin gets around that limitation by enabling the currency to be split into smaller units, known as “satoshi”. We can probably anticipate that similar currency splitting will develop with other cryptocurrencies, including Litecoin.
Litecoin is actually one of the older cryptocurrencies, though not as old as Bitcoin. Still, having been founded in 2011, it is one of the older versions.
One of the ways Litecoin has sought to improve on Bitcoin is through the speed of transactions. The Litecoin network targets transaction processing every 2.5 minutes, rather than 10 minutes for Bitcoin. This provides for faster transaction confirmation.
However, on the downside, Litecoin requires more system memory, and is also more complicated and more expensive to produce than Bitcoin. Still, it’s become one of the largest cryptocurrencies. It’s worth considering since the cryptocurrency field is so new and fast developing, that there’s no way to know which currencies will be the ultimate survivors.
Investing in Litecoin
Litecoin is currently trading at $133, and has a total market capitalization of about $7.4 billion. Litecoin opened on August 28, 2013, at $4.30. Just like Ethereum, it bounced around and moved gradually higher in 2017. An all-time price peak of $331 was reached on December 20, 2017.
The top three exchanges to buy Litecoin include:
Carefully check the fee structure, as it will be different from the fees presented for Coinbase above. Also keep in mind that Litecoin is a smaller, more thinly traded cryptocurrency than Ethereum, and certainly Bitcoin.
We can probably refer to Ripple (XRP) as a middle-aged cryptocurrency. Not that it’s that old, having been founded in 2012. But it’s older than Ethereum, but not quite as old as Bitcoin or Litecoin. The currency units themselves are referred to as ripples. Its validators include ISP providers and even the Massachusetts Institute of Technology. The total supply of Ripple is nearly 100 million, of which 39 million is currently outstanding.
But Ripple is actually better known as a digital payment protocol, rather than an actual cryptocurrency. Or put another way, it’s a real-time gross settlement system, – abbreviated as “RTGS” – as well as a currency exchange and remittance network. It’s an open source, peer-to-peer, decentralized Internet-based platform. It’s designed to facilitate the seamless transfer of money in virtually any form. This includes both other cryptocurrencies, as well as traditional currencies, like the dollar, the euro, and the yen.
It’s already in use by companies like UniCredit, UBS and Santander Bank. It’s increasingly being adopted as a settlement infrastructure technology by banks and payment networks. This can be an important indication of Ripple’s “staying power”. It’s adoption by large institutions practically guarantees its relevance going forward.
Investing in Ripple
Ripple is currently trading at $0.57, and has a total market capitalization of well over $22 billion. By market capitalization, Ripple is the third largest cryptocurrency. It opened on August 4, 2013, at just a half US cent. It’s bounced around wildly since. The all-time price peak of $3.65 was reached on January 4, 2018.
Ripple can be purchased on the following exchanges:
Once again, carefully check the fee structure on each platform.
ADDING CRYPTOCURRENCIES TO YOUR INVESTMENT PORTFOLIO
So why are we discussing cryptocurrencies, even if we don’t make them available here at Treasury Vault? As we discussed in previous articles, we believe the dynamics that have produced a consistently rising stock market since the end of the Financial Meltdown are shifting for the worse.
Most investors today are primarily invested in stocks, with a much smaller allocation in bonds. We believe portfolios will need to be adjusted for an increasingly volatile market environment.
This starts with reducing portfolio risk overall, but also counterbalancing that by including alternative investments.
This means a larger allocation in cash. But we also believe adding real estate, gold and silver, foreign currencies, and even “exotic” currencies, such as the Iraqi Dinar and the Vietnamese Dong, will be a positive step. And yes, we believe cryptocurrencies should be part of that alternative investment mix.
The basic idea is to move more of your portfolio into safe assets. But at the same time, it will be equally important to put at least a small percentage of your money into the type of investment assets that are likely to produce positive returns in the face of a declining stock market.
Stay ahead of unfolding trends, so you don’t get rolled over by them. Now is the time to act.