Cryptocurrencies are a highly volatile asset class, remain unregulated in Australia and are all too often an arena for hackers and fraudsters. Still, Australians are crypto-curious. According to consumer group CHOICE, almost one in five Australians are either involved in some form of cryptocurrency trading or are interested in getting involved. Those who steer clear of crypto often do so because of the risk of crypto fraud.
From Bitcoin and Ethereum to Dogecoin and Tether, there are thousands of different cryptocurrencies, which makes it overwhelming when you first start.
To help you find out, here are the top 10 cryptocurrencies based on their market capitalization or the total value of all coins in circulation. This is not a recommendation on what you should or shouldn’t buy, just a list of the most valuable so you can get a feel for the playing field before deciding whether to roll the dice and invest in crypto.
What are cryptocurrencies?
A cryptocurrency is a digital asset that can circulate without the centralized authority of a bank or government. To date, there are more than 20,000 cryptocurrency projects out there representing the entire $952 billion crypto market.
1. Bitcoin (BTC)
- Market value: $367 billion
Created in 2009 by Satoshi Nakamoto, Bitcoin (BTC) is the original cryptocurrency. As with most cryptocurrencies, BTC runs on a blockchain, or ledger that logs transactions distributed across a network of thousands of computers. Because additions to the distributed ledgers must be verified by solving a cryptographic puzzle, a process called proof of work, Bitcoin is kept safe and secure from fraudsters.
Bitcoin’s price has skyrocketed as it has become a household name. In May 2016, you could buy one Bitcoin for around $500. As of September 30, 2022, the price of a single Bitcoin was around $19,531. That’s a growth of more than 3,800%.
Related: How to buy Bitcoin
2. Ethereum (ETH)
- Market value: $159 billion
Both a cryptocurrency and a blockchain platform, Ethereum is a favorite among software developers because of its potential applications, such as so-called smart contracts that automatically run when conditions are met and non-fungible tokens (NFTs).
Ethereum has also experienced tremendous growth. From April 2016 to the end of September 2022, the price went from about $11 to about $1388, increasing about 12518%.
Related: How to buy Ethereum
3. Tether (USDT)
- Market value: $68 billion
Unlike some other forms of cryptocurrency, Tether (USDT) is a stablecoin, meaning it is backed by fiat currencies such as the US dollar and euro and hypothetically holds a value equal to one of those denominations. In theory, this means that Tether’s value is supposed to be more consistent than other cryptocurrencies, and it is favored by investors who are wary of the extreme volatility of other coins.
4. US Dollar Coin (USDC)
- Market value: $45 billion
Like Tether, USD Coin (USDC) is a stablecoin, meaning it is backed by the US dollar and aims for a ratio of 1 USD to 1 USDC. USDC is powered by Ethereum and you can use USD Coin to complete global transactions.
5. Binance Coin (BNB)
- Market value: $43 billion
Binance Coin (BNB) is a form of cryptocurrency that you can use to trade and pay fees on Binance, one of the largest crypto exchanges in the world. Since its launch in 2017, Binance Coin has expanded to only facilitate trades on Binance’s exchange platform. Now it can be used for trading, payment processing or even booking travel arrangements. It can also be traded or exchanged for other forms of cryptocurrency, such as Ethereum or Bitcoin.
BNB’s price in 2017 was only $0.10. By the end of September 2022, the price had risen to around $283, a gain of approximately 282,900%.
Related: Cryptocurrency glossary
6. XRP (XRP)
- Market value: $24 billion
Created by some of the same founders as Ripple, a digital technology and payment processing company, XRP can be used on that network to facilitate the exchange of different types of currency, including fiat currencies and other major cryptocurrencies.
At the beginning of 2017, the price of XRP was $0.006. As of October 13, 2022, the price reached $0.48, representing an increase of 7900%.
7. Binance USD (BUSD)
- Market value: $21 billion
Binance USD (BUSD) is a stablecoin that Paxos and Binance founded to create a cryptocurrency backed by the US dollar. To maintain this value, Paxos has an amount of US dollars equal to the total supply of BUSD. As with other stablecoins, BUSD gives traders and crypto users the ability to engage in transactions with other crypto assets while minimizing the risk of volatility.
8. Cardano (ADA)
- Market value: $13 billion
Somewhat later on the crypto scene, Cardano (ADA) is known for its early embrace of proof-of-stake validation. This method speeds up transaction times and reduces energy use and environmental impact by removing the competitive, problem-solving aspect of transaction verification on platforms like Bitcoin. Cardano also works like Ethereum to enable smart contracts and decentralized applications, which ADA, its native coin, powers.
Cardano’s ADA token has seen relatively modest growth compared to other major cryptocurrencies. In 2017, ADA’s price was $0.02. As of October 13, 2022, the price was $0.38. This is an increase of 1800%.
9. Solana (SOL)
- Market value: $11 billion
Solana is designed to aid the use of decentralized finance (DeFi), decentralized apps (DApps) and smart contracts. SOL, Solana’s native token, powers the platform.
When it launched in 2020, SOL’s price started at $0.77. By mid-October 2022, the price was around $31.17, a gain of 3948%.
10. Dogecoin (DOGE)
Dogecoin became known as a joke in 2013, but quickly developed into a prominent cryptocurrency thanks to a dedicated community and creative memes. Unlike many other cryptos, there is no limit to the number of Dogecoins that can be created, making the currency vulnerable to devaluation as the supply increases.
Dogecoin price in 2017 was $0.0002. In mid-October 2022, the price was $0.05, up 24900%.
*Market caps and prices taken from coinmarketcap.com, current as of October 13, 2022. This article is not an endorsement of any particular cryptocurrency, broker or exchange, nor does it constitute a recommendation of cryptocurrency as an investment class.
What are cryptocurrencies?
Cryptocurrency is a form of currency that only exists in digital form. Cryptocurrency can be used to pay for online purchases without going through an intermediary, such as a bank, or it can be held as an investment.
How does trading cryptocurrencies differ from trading stocks?
Although you can invest in cryptocurrencies, they are very different from traditional investments, such as stocks. When you buy shares, you buy a stake in a company, which means you have the right to do things like vote on the company’s direction. If that company goes bankrupt, you may also receive some compensation once creditors have been paid from its liquidated assets. In Australia, you are also paid regular dividends by the company, when it makes a profit.
Buying cryptocurrency does not give you ownership of anything other than the token itself; it is more like exchanging one form of currency for another. If the crypto loses its value, you will receive nothing afterwards.
There are several other important differences to keep in mind:
- Opening hours: Shares are only traded during stock exchange opening hours, usually 9am to 4pm AEST, Monday to Friday. Cryptocurrency markets never close, so you can trade 24 hours a day, seven days a week.
- Regulation: Shares are regulated financial products, meaning a governing body verifies their credentials and their finances are public affairs. In contrast, cryptocurrencies are not regulated investment vehicles, so you may not be aware of the inner dynamics of your crypto or the developers working on it. Also, you have very little protection when things go wrong.
- Volatility: Both stocks and cryptocurrency involve risk; the money you invest may lose value. Shares, however, are directly linked to companies and generally rise and fall based on those companies’ performance. Cryptocurrency prices are more speculative – no one is quite sure of their value yet. It makes them much more volatile and influenced by something as small as a celebrity tweet.
Do you have to pay tax on cryptocurrency?
If you buy and sell coins, it’s important to be aware of cryptocurrency tax rules. Cryptocurrency is treated as a capital asset, like shares, rather than cash, which means you have to pay your marginal tax rates on the crypto when you file your return with the ATO. It also means that if you sell cryptocurrency at a profit, you will have to pay capital gains tax.
Are there cryptocurrency exchange traded funds (ETFs) in Australia?
Given the thousands of cryptocurrencies that exist (and the high volatility associated with most of them), it’s understandable that you might want to take a diversified approach to investing in crypto to minimize the risk of losing money. The first crypto ETF launched in Australia in 2022, and there are now six crypto-backed ETFs to choose from.
How do you buy crypto?
You can buy cryptocurrencies through Australian-based crypto exchanges, such as CoinSpot and Swyftx or platforms such as eToro Australia.
Why are there so many cryptocurrencies?
Cryptocurrency is an emerging field with more than 19,000 crypto projects in existence, with very few barriers to entry. Last year in particular, we witnessed a boom in the crypto market, with thousands of new crypto projects added.
While some cryptos act as currencies, others are used to develop infrastructure. For example, in the case of Ethereum or Solana, developers build other cryptos on top of these platform currencies, and that creates even more opportunities (and cryptos).
What are altcoins?
When we first think of crypto, we usually think of Bitcoin first. That’s because Bitcoin represents more than 45% of the total cryptocurrency market. So when we talk about cryptos outside of Bitcoin, all these cryptos are considered altcoins.
Ethereum, for example, is considered the most popular altcoin.
Why is bitcoin valuable?
Part of what makes Bitcoin so valuable is its scarcity. Bitcoin’s maximum supply is limited to 21 million coins. There are currently 19 million coins in circulation.
To create supply, Bitcoin rewards crypto miners with a set amount of Bitcoin. (To be precise, 6.25 BTC is issued when a miner has successfully mined a single block.). To keep the process in check, the rewards given for mining Bitcoin are halved almost every four years.
Why are cryptocurrencies important?
Cryptocurrencies are increasing in importance and are not going away anytime soon. While the original premise of cryptocurrency was to fix the problems of traditional currencies, now a whole host of useful cryptocurrencies have emerged, thanks to the creation of the blockchain. However, this does not mean that you should invest in them: they are very volatile and you can lose all your money.
