Cryptocurrencies are considered high risk investments due to the unpredictable and volatile nature of the market
Following a boom year in 2021 and a series of high-profile celebrity endorsements, cryptocurrency started 2022 as a financial obsession - though this week has marked a succession of crypto-coins crashing in value.
It’s sent crypto commentators and investors a tizzy, with speculation rife about whether the crypto market will recover.
After a difficult week, the past 24 hours have seen signs of recovery for some crypto coins.
When did Crypto come to market prominence?
It’s sudden rise in popularity was fuelled by record high market gains experienced in 2021 and Twitter mentions from public figures like Elon Musk and Snoop Dogg.
Despite this recent attention, cryptocurrencies have been around for much longer with the first digital token Bitcoin founded in 2009 - proving they are more than just the latest internet fad.
Musk’s own companies Tesla invested $1.5billion (£1.06million) in Bitcoin in February 2021 and SpaceX announced plans to send Dogecoin to the “literal moon” just three months later.
What is cryptocurrency?
Our interview with financial expert Martyn James goes into further detail, but to summarise:
“Cryptocurrency is basically a digital currency that you keep online in a digital wallet. You can use it to buy things, but at the moment, people are mostly investing in cryptocurrency because of the extraordinary jumps in value that have been reported in the media.
The name comes from the ‘encryption’ which makes the currency hard to fake.”
Is it safe to invest in cryptocurrency?
Cryptocurrency prices are changing all the time, with big swings either way to contend with, making them appealing when the arrow is green but less so when red and pointing down.
Only recently the market was sent spiralling when Musk announced Tesla would no longer be accepting Bitcoin as payment for its products due to “environmental concerns”.
A further blow was felt recently when China announced plans to tighten its laws around cryptocurrency trades and exchanges, which saw the market plunge downwards further.
It is this volatile movement which makes cryptocurrencies high risk investments and leads to words of caution expressed by regulatory bodies like the UK’s Financial Conduct Authority.
Yet crypto users don’t seem phased and many see the potential rewards outweighing the risk.
How can I buy cryptocurrency in the UK?
If you’re undeterred by the volatility of the crypto market and want to get your hands on a cryptocoin, you will need a ‘wallet’ - an online app to hold your crypto.
You will need to decide whether to go for a ‘hot’ or ‘cold wallet’.
On a ‘hot’ wallet, crypto is stored by the exchange or provider through an app or your computer.
Every exchange will offer a free wallet where your purchases will be stored. Be warned, though - they’re easy to set up and use, they are vulnerable to hackers and, if an exchange closes, traders will be left with no rights to recover funds.
In contrast, a ‘cold’ wallet is a portable encrypted device such as a USB stick that allows you to physically carry your bitcoin. More secure against hackers than ‘hot’ wallets they can be very expensive.
Here we look at 7 of the top performing cryptocurrencies on the market, according to Coinbase.
The world’s first cryptocurrency is the most established and the most valuable with a market capitalization (market cap) of £470.4B, leading the way for others to follow.
It reached new highs in April 2021 when the price of one Bitcoin was marketed at £47,240.05 but has felt the full weight of the crypto crash that followed in early May.
As if 13 May:
Bitcoin’s current price is listed as £24,696 - a -39.16% decrease over 12 months.
That said, it’s been on an upwards trend since 2009, with a +28,770% since inception, and a +13.19% over the past 24 hours.
Whether the recent downwards dip for the oldest cryptocurrency continues remains to be seen.
Ethereum reclaimed its title as the second largest cryptocurrency by market capitalization in 2018 and hasn’t let go of its placing behind Bitcoin since.
Founded much later than its rival, in 2015, Ethereum has a smaller market cap of £210.4B.
It stands at £1,673.12 on 13, a decrease of -44.85% over the past year. It’s up 7.41% over the past day.
Unlike some other cryptos, Tether is known as a stablecoin which aims to maintain stable cryptocurrency valuations across the market.
It has consistently kept a price of around $1 US dollar, equivalent to 71p GB pound sterling today, and has an appeal from investors who want to avoid the extreme volatility of the market.
The crypto has a controversial past, with the New York Attorney General accusing Tether’s parent company of hiding substantial losses to the tune of $850m (£600m) in 2019.
Its market value plummeted at the time but has recovered since, though UK investors beware its price fluctuates in accordance with the current USD-GBP exchange rate.
On 13 May, £.82,up 1.17% over the past 24 hours, although down .27% over the past year -suggesting it’s living up to it’s stable reputation.
Binance Coin is another cryptocurrency which enjoyed market highs in 2021, but is showing signs of struggle in 2022.
It currently sits at a market price of £48M as of 13 May, an increase of 8.48% over the past day.
A self-proclaimed “green cryptocurrency”, Cardano has somewhat weathered the storm brought on by the environment concerns spoken about by Tesla CEO Elon Musk.
Its founder Charles Hoskinson estimates that Cardano’s entire system uses less than 0.01% of the energy consumed by Bitcoin’s network and controversial mining process.
And, as a result, saw an immediate increase as others stumbled.
Its current price of £0.47 marks a decrease of -70% over the past 12 months, though it has recovered 26% over the past 24 hour.
XRP, the digital token created by Ripple, hit the headlines in April 2021 for outperforming Bitcoin and Ethereum as it saw considerable market gains beyond its more moderate competitors.
Its market cap of £18.1B is the seventh largest of the current cryptocurrencies listed.
Founded in 2012, it’s current price of £0.33 represents a -67.97% drop over the last 12 months.
The price has risen 15.1% over the past 24 hours.
Possibly one of the most popular cryptocurrencies of late is Dogecoin, having attracted public mentions from Elon Musk, Snoop Dogg and others, as well as Saturday Night Live.
Created as a joke, the crypto is synonymous with a particular breed of dog - Shiba Inu - which was an internet meme at the time of its listing on the market. ‘Memecoins’ are particularly popular.
If you are planning on investing in cryptocoins, please note:
The value of investments is variable and can go down as well as up.
If you’ve been approached by a ‘trader’ promising large returns, this is a scam.
Always ensure the seller is registered with the UK Financial Conduct Authority (FCA). Many cryptocurrency sellers are not. A list of registered traders can be found on the FCA website.
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