Digital currencies have struck a very important chord in people’s souls, namely greed. It is very easy to scare market participants, but it is also easy to seduce them with wealth (which pushes assets to their lows and highs).
Stories about millionaires and billionaires who made fortunes on the “crypt” attracted a huge number of speculators. There is little to compare with the idea that $10 invested in bitcoin in 2010 (when it cost 5 cents per token) would have turned into $6.0 million in 2021 (based on the price of $30,000).
Since bitcoin broke into the investment arena, the cryptocurrency family has grown to about 11,000 members. And although the vast majority of them will remain on the sidelines of history, and some of them are pure fraud, the opportunity to get rich continues to spur speculators.
Investing and trading are two different approaches
To throw a few dollars into a new cryptocurrency with the full understanding that the investment may not pay off is like pointing a finger at the sky. But many are willing to take this risk.
Trading is a completely different matter. Comfortable currency trading requires sufficient liquidity, which is usually offered by tokens with a significant market capitalization (since this reduces the spread between buyers’ prices). Klaytn (KLAY) and Tezos (XTZ) belong to this category; their market capitalization is about $ 2 billion, which allowed them to take a place in the list of leaders of this asset class.
Very few cryptocurrencies have overcome the 1.85 billion mark
According to CoinMarketCap, as of July 20, only 44 out of 10,972 cryptocurrencies had a market capitalization of over $1.85 billion. Thus, 96% of the total value is concentrated in the top 0.40% of currencies. The remaining 10,928 cryptocurrencies account for less than 4% of the total capitalization of the growing market.
The fantastic rallies of the leading cryptocurrencies have provoked a speculative frenzy. The participants were ready to blindly invest in digital currencies, hoping to find the one that would bring income comparable to bitcoin, ether and Dogecoin. However, the “elite club” is in no hurry to accept new members, since most tokens are doomed to oblivion.
When it comes to investing, invest no more than you are willing to lose.
Sufficient liquidity facilitates trading
Leading cryptocurrencies offer attractive opportunities to both investors and traders. However, it is worth remembering that accompanying risks are always attached to the possible profit. Increased volatility (which distinguishes digital assets from the rest) only increases them.
When it comes to trading, cryptocurrencies with a high market capitalization are more preferable for traders who want to make money on trend movements and other technical models. However, wide price ranges also increase risks.
Gaps and periods of low trading volumes are not alien even to bitcoin and ether, which account for about 63.5% of the capitalization of all cryptocurrencies. The lower we go down the list of currencies, the lower the liquidity and the higher the probability of forming gaps.
Spreads between the prices of sellers and buyers of cryptocurrencies with high market capitalization usually remain low, but the gap widens as volatility increases. In the end, the sharp movements of the beginning of the year made bitcoin and ether much less liquid; then the sale cost them more than half the cost.
High capitalization increases liquidity, but it does not guarantee a narrow spread between supply and demand prices in rising or falling markets.
The number of cryptocurrencies continues to grow
In April-May, the cryptocurrency market at least took a pause; then bitcoin, ether and many other tokens fell from their peaks, but this correction did not stop the influx of new currencies.
New cryptocurrencies enter the market every day. As of the end of the second quarter, there were 10,725. In less than a month, the number rose 2.3% to 10,972 (although prices are still close to recent lows).
Klaytn and Tezos belong to the elite of digital currencies, and their market capitalization is about $ 2 billion.
Klaytn is valued at more than 2.3 billion dollars
Klaytn (KLAY) is an internal token of the Kakao Corp blockchain (KS:035720). That way, the company has released a popular messaging application KakaoTalk, which is used by more than 90% of South Koreans. The company has achieved significant success through taxi-hailing and online banking applications.
On the KLAY website, the crypto protocol is described as a service-oriented platform that:
“It provides millions of users with a convenient way to work with blockchain … Klaytn improves the lives of businesses and entrepreneurs with the help of blockchain technology.”