Why are there so many kinds of cryptocurrency?
It’s important to remember that Bitcoin is different from cryptocurrency in general. While Bitcoin is the first and most valuable cryptocurrency, the market is large.
There are more than two million different cryptocurrencies in existence, according to CoinMarketCap.com, a market research website
. And while some cryptocurrencies have total market valuations in the hundreds of billions of dollars, others are obscure and essentially worthless.
If you’re thinking about getting into cryptocurrency, it can be helpful to start with one that is commonly traded and relatively well-established in the market. These coins typically have the largest market capitalizations.
Thoughtfully selecting your cryptocurrency, however, is no guarantee of success in such a volatile space. Sometimes, an issue in the deeply interconnected crypto industry can spill out and have broad implications on asset values.
For instance, in November of 2022 the market took a major hit as the cryptocurrency exchange FTX struggled to deal with liquidity issues amid a spike in withdrawals. As the fallout spread, cryptocurrencies both large and small saw their values plummet.
Are cryptocurrencies financial securities, like stocks?
Whether or not cryptocurrency is a security is a bit of a gray area right now. To back up a little, generally, a “security” in finance is anything that represents a value and can be traded. Stocks are securities because they represent ownership in a public company. Bonds are securities because they represent a debt owed to the bondholder. And both of these securities can be traded on public markets.
Regulators are increasingly starting to signal cryptocurrencies should be regulated similarly to other securities, such as stocks and bonds. But this take is receiving pushback; scholars, legal firms and some of the biggest players in the crypto industry have argued against this, claiming the rules that apply to stocks and bonds, for example, don’t apply as broadly to cryptocurrencies.
The Securities and Exchange Commission has set its sights on the sector generally. The agency has raised concerns about activities including crypto staking, and well as the operations of some large crypto companies.
» Learn more: What’s happening with crypto regulation?
Whether the SEC will treat cryptocurrencies, or specific types of cryptocurrencies, as securities will be at the forefront of crypto regulation, and could have major implications for the asset class in the near future.