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Is there a plethora of cryptocurrencies to pick from?

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With about 21,000 different coins available across many different subsectors of the cryptocurrency market and the industry expanding quickly, investors are spoiled for choice, from the metaverse to decentralized finance. Industry professionals have now frequently seen how quickly new cryptocurrencies can be generated.

Photo by Kanchanara / Unsplash

Following the passing of Queen Elizabeth (1), the market was overrun by meme coins bearing her name. Some criticized this, saying it was in poor taste and detrimental to the cryptocurrency industry. Despite the emergence of thousands more cryptocurrencies, some of which are modeled after popular ones like Bitcoin and Ethereum (2), these two continue to rule the industry with a combined valuation of 58.2% of the total market.

Although Bitcoin and Ether are widely known and accepted, it is true to claim that many blockchain and cryptocurrency projects prefer to have their tokens, and in some situations, it is also thought to be necessary. Football heavyweights like Paris Saint-Germain (3) would need to be able to provide their digital assets before fan tokens for football games would make sense.

While assets pegged to the U.S. dollar dominate the market, stablecoins are another class of cryptocurrency where diversity of options is important. Some investors prefer to utilize stablecoins priced in their local fiat currency, such as the euro or pound.

Although stablecoin issuers have long questioned whether the coins in circulation are sufficiently backed by actual cash in reserve or the range of offers, these issues do not prevent investors from exercising due diligence and finding an asset that suits their level of risk tolerance.

The cryptocurrency market is unstable, with ten different versions of the same coin and countless other variations, each with a unique price point and value ratio. Although there are always two sides to a story, the bitcoin sector also has certain drawbacks.

All crypto coins are together in the dark
Photo by Kanchanara / Unsplash

With thousands of alternative cryptocurrencies available, the market is likely to become even more fragmented as a result of the constant demand for new cryptocurrencies. Customers may incur additional costs if a project insists on using only its native token since they may need to convert from more well-known cryptocurrencies and pay trading commissions along the way.

Similarly, it is impossible to imagine Gmail permitting users to exclusively send emails to other Gmail users, (4) with Yahoo and Outlook acting as walled gardens. This is the current state of affairs in the cryptocurrency sector, and while attempts are being made to improve cross-chain communication and build bridges across blockchains, much work remains to be done.

Such connections could also result in unfortunate flaws, like the Ronin hack that occurred back in March, and raise the question of whether there are too many cryptocurrencies, with some proponents contending that this shows how ineffective the market is. This raises concerns about Bitcoin’s fixed number of 21 million coins in circulation compared to other cryptocurrencies’ infinite production.

According to data from 99 Bitcoins (5), there are more than 1,700 “dead coins,” or digital assets that have failed due to inactive development, poor online visibility, low trading volume, or a combination of all four of these issues. Despite the bear market’s predictions, this number may increase in the next few months.

It is also important to note that the crypto bull run of 2021 drew comparisons to the dotcom boom of 20 years prior, as during the 2000s, frenzied activity led to an explosion in the number of internet companies trading on the stock market, many of which boasted astronomically high valuations. However, many of these companies also ended up going bankrupt, including Pets.com and Boo.com.

In a recent KPMG report (6), they cautioned that cryptocurrencies without distinct and compelling value propositions might also succumb to extinction in the coming months. They also noted that this might be beneficial for the ecosystem as a whole because it will clear up some of the mess that was generated during the bull market’s euphoria and only the best will endure.

While certain cryptocurrencies will survive and grow regardless of how severe or protracted the bear market may be, cryptocurrencies remain a very experimental technology, and there will inevitably be failures along the road. Although some supporters claim that the cryptocurrency sector is still very young.

The number of cryptocurrencies in existence is unlikely to decrease very soon due to the inventive nature of the crypto industry and the fascinating use cases for digital assets that are constantly emerging. This means that it is on investors to conduct in-depth due diligence when deciding which coins to buy, and exchanges must play a crucial role in ensuring that they only offer reliable coins that bring value to the ecosystem.

  • Coinsmart. Europe’s Best Bitcoin and Crypto Exchange.Click Here
  • Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. Access Here.
  • Source: https://cryptocurrency.news/plethora-of-cryptocurrencies-to-pick-from/
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