Introduction
Cryptocurrencies have revolutionized the way we store and transfer value by eliminating the need for intermediaries like banks. Utilizing blockchain technology, cryptocurrencies create a decentralized financial system that operates without central authority. This decentralization streamlines financial transactions and facilitates cross-border payments with greater efficiency.
The world’s first cryptocurrency, Bitcoin was specifically designed to create decentralized financial system. Unlike fiat currencies which can be printed and subject to inflation, Bitcoin has limited supply. This limited supply is intended to create scarcity to prevent inflation.
Financial Utility of Cryptocurrencies
Cryptocurrencies can be effectively used as store of value against fiat money inflation. The price of cryptocurrencies depends on various factors such as supply, current demand, macroeconomic events like interest rates, and regulatory developments. These macroeconomic factors affect investor confidence leading to sell-offs and buying sprees. Crypto investors capitalize on inherent volatility of crypto prices to make profits. During economic downturns, cryptocurrencies can attract interest as alternative investment opportunities.
In addition to being used as store of value, cryptocurrencies are also widely used for business payments. Their decentralized nature facilitates cost-effective cross-border payments, reducing transaction fees compared to traditional financial systems. This utility makes cryptocurrencies a practical option for many consumers and businesses looking to streamline financial transactions.
Top 5 Cryptocurrencies Shaping the Future of Finance
- Bitcoin (BTC)
From since its creation, Bitcoin has always been dominant crypto with most share of market. Currently BTC holds 56% market share, and it also has largest market capitalization. It is considered a great investment asset with a potential to grow further in the long-term. Bitcoin is used in both short-term and long-term investment strategies. Recently in 2024, there has been growing demand of BTC, fuelled by multiple factors such as halving event and approval and launch of BTC ETFs.
In the previous years, the adoption of Bitcoin as payment asset has increased significantly. Many companies like Microsoft, AT&T and Shopify allow crypto payments. More businesses in the future are likely to adopt crypto payments because it provides several benefits such as expansion of customer base, lower transaction costs, and access to unbanked population.
- Ethereum (ETH)
It is second largest cryptocurrency in terms of market capitalization, currently having a price of $3250. It is also a great investment asset widely used by DeFi community. Despite losing most of the value in 2023, it has surged again in 2024 and reached peak of $4000. Many analysts expect its value to grow in long-term due to its rising adoption fuelled by DeFi protocols. Ether is native coin of Ethereum blockchain, which is most widely used for DApp development.
The growth of DeFi directly fuels ETH’s demand because this crypto is used for transaction fees, collateral, and participation in various financial products. This crypto is also particularly used in staking to generate passive income.
- Tether (USDT)
Tether is the most popular stablecoin that is pegged to real-world asset like US Dollar. Due to its stable value, Tether is widely used in trading pairs with BTC and other cryptocurrencies. While stablecoins cannot be used as investment assets since their price remains the same, they have many other financial utilities. Traders and investors also use Tether (USDT) to hedge against market volatility of other cryptocurrencies. By holding this coin, they protect their portfolio’s value without needing to convert to fiat currency.
This stablecoin has great use cases in decentralized finance (DeFi) applications. It is used for lending, borrowing and earning interest. By staking Tether, investors can obtain predictable rewards, providing a stable and reliable way to participate in DeFi ecosystems.
- BNB
BNB is native coin of Binance Smart Chain (BSC). Originally launched as ERC-20 token on Ethereum blockchain, later it transitioned to BSC. It is also widely used as native coin of Binance ecosystem. Binance traders can get discount on transaction fees by holding and staking BNB. This coin is also used in staking and other DeFi activities. One interesting use case is that it provides the ability to participate in token sales on Binance launchpad.
As of now, BNB is priced at approximately $589, and it reached its all-time high (ATH) of $698 in June 2024. If you are a Binance trader or actively use DeFi protocols built on Binance Smart Chain (BSC), BNB could be a valuable investment for you.
- Solana (SOL)
It is fourth largest cryptocurrency in terms of market capitalization currently priced at $185. It is native coin of Solana blockchain, which is known for its high-speed transactions and scalable capabilities. The popularity of SOL has been largely driven by the robust ecosystem of DApps and DeFi protocols built on the Solana network.
This cryptocurrency is not only used in investment but also used in various DeFi activities. Many investors use this coin for staking to earn passive income. Beyond staking, this coin is actively used in Solana ecosystem for other DeFi activities such as lending, borrowing, yield farming and trading NFTs.