Picking the perfect coin: how to choose the right cryptocurrency to fund your account
In our ‘Trading with crypto: Top 3 myths’ guide, we discussed how to buy crypto on Deriv and how to start trading with it. However, which cryptocurrency should you choose? There are thousands of digital coins on the market, and each one has its own features.
At Deriv, we've simplified your choices by offering a handful of major and widely popular cryptocurrencies to fund your account. With countless digital coins available, deciding which one to trade can be daunting. In this guide, we'll highlight the key factors to consider, helping you make an informed decision.
The evolution of crypto: What is a stablecoin?
Traders have the option to fund their accounts with cryptocurrencies, which, in addition to popular coins like Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC), also include stablecoins.
A stablecoin is a specific type of cryptocurrency that is pegged to a stable asset, such as the US dollar or gold, to maintain a consistent value. Essentially, stablecoins serve as digital representations of fiat currency, providing a reliable alternative in the often volatile crypto market.
Crypto comparisons: funding your account
Below, we will explore five ways to fund your account using cryptocurrencies, including a couple stablecoins:
1. Bitcoin (BTC)
Bitcoin is the most well-known and accepted cryptocurrency in the world. The unique features of this digital coin have turned it from being just another coin to exchange into a store of value with high purchasing power — an equivalent of gold in the crypto world.
Just like the famous precious metal, Bitcoin has a limited supply (21 million coins only) and is also decentralised. The limited supply provides protection from inflation, while the decentralisation protects from the control and influence of governments.
Bitcoin transaction time
The BTC transaction specifications are:
- Transaction processing time: approximately 30 minutes
- Amount of confirmations: 3 (3×10 minutes each = about 30 minutes)
- Transaction fees: high
2. Ethereum (ETH)
Ethereum was created as an open-source blockchain platform to create, release, and monetise apps, where Ether token served as a payment method. Due to its popularity, it eventually became accepted as a payment currency by merchants and service providers outside the platform.
Today, Ethereum is the second-largest cryptocurrency by market capitalisation. However, experts believe that the value of this digital coin is still underestimated and should be much higher.
Ethereum transaction time
The specifications for Ethereum transactions are as follows:
- Transaction processing time: from 1 to 15 minutes
- Amount of confirmations: 6 (6×10 seconds = 1 minute)
- Transaction fees: vary – from very low to very high, depending on network congestion
3. Litecoin (LTC)
Litecoin is widely considered to be the silver to Bitcoin’s gold. It was indeed created to complement Bitcoin as a more accessible and more affordable cryptocurrency. As a result, Litecoin has quickly become a new medium of exchange — used for payments, while Bitcoin transformed into a store of value — an asset that will have purchasing power in the future.
Litecoin has a much larger but still limited supply of 84 million coins and significantly lower transaction fees, which made it the most inexpensive option for cryptocurrency transfers.
Litecoin transaction time
The specifications of LTC transactions are:
- Transaction processing time: approximately 30 minutes
- Amount of confirmations: 12 (12×2.5 min each = about 30 minutes)
- Transaction fees: very low
4. Tether (USDT) OMNI
Tether is by far the largest stablecoin by market cap. Each unit of Tether is backed by the USD with a 1:1 equivalent. However, unlike other cryptocurrencies, Tether is issued and regulated by Tether Limited, which makes it a fully centralised cryptocurrency.
The ‘omni’ part of this digital coin means that Deriv accepts USDT transactions that are proceeded via omnilayer – a software built on top of Bitcoin’s blockchain.
While the ‘erc-20’ part means that the USDT transactions are also processed via the new transport layer based on the Ethereum blockchain.
It gives Tether the security of Bitcoin or Ethereum while letting it operate as an independent cryptocurrency.
USDT transaction time
The USDT OMNI transaction specifications are:
- Transaction processing time: from 1 to 15 minutes
- Amount of confirmations: 6 (6×10 seconds = 1 minute)
- Transaction fees: vary – from very low to very high (depending on network congestion)
The specifications for ERC-20 (eUSDT) transactions are as follows:
- Transaction processing time: from 1 to 15 minutes
- Amount of confirmations: 6 (6×10 seconds = 1 minute)
- Transaction fees: vary – from very low to very high, depending on network congestion
5. USD Coin (USDC)
The USD Coin is the second-largest stablecoin that is also tied to the USD with a 1:1 ratio but is powered by Ethereum’s blockchain. This coin is also centralised and held by a group of three companies that maintain full reserves of the equivalent fiat currency. USDC is currently the most transparent stablecoin in the crypto world, and it is accepted by hundreds of companies worldwide.
USDC transaction time
The USDC transaction specifications are:
- Transaction processing time: approximately 30 minutes
- Amount of confirmations: 3 (3×10 min each = about 30 minutes)
- Transaction fees: vary – from very low to very high, depending on network congestion
What to look for when buying crypto
Choosing the right cryptocurrency involves careful consideration of several key factors to ensure informed decision-making. Here are the aspects to keep in mind:
- Understand the coin's utility and purpose
Each cryptocurrency has unique characteristics and serves different functions. For example, Bitcoin (BTC) is often considered a store of value, similar to digital gold, while Ethereum (ETH) supports decentralised applications (dApps) through its blockchain. Stablecoins like Tether (USDT) and USD Coin (USDC), which are pegged to fiat currencies, offer stability amidst the volatility of other cryptocurrencies. When choosing a cryptocurrency to hold or fund your account with, think about your goals—whether you're looking for long-term value, a stable medium for transactions, or high volatility for potential short-term gains.
- Consider holding multiple cryptocurrencies for diversification
Diversification is a proven strategy for managing risk in your portfolio. Instead of focusing solely on one cryptocurrency, consider holding a mix of coins to spread your exposure. This approach helps mitigate the impact of sharp price swings in any single coin and allows you to benefit from various market conditions. For instance, you could hold Bitcoin for long-term growth while maintaining stablecoins like USDT or USDC for shorter-term stability and transaction flexibility.
- Watch for correlations between cryptocurrencies
Cryptocurrencies often move together, especially those that share similar technologies or market drivers. For example, Ethereum and ERC-20 tokens frequently show correlated price movements due to their reliance on the same blockchain infrastructure. By understanding these correlations, you can better structure your portfolio, either by balancing high-risk coins with more stable assets or by holding uncorrelated coins to reduce overall risk in varying market conditions.
- Assess market sentiment and trends
Market sentiment plays a significant role in driving cryptocurrency prices, particularly in the short term. Bitcoin and Ethereum are typically seen as indicators of the broader crypto market's performance. Monitoring news, sentiment indicators, and trends surrounding a particular cryptocurrency can provide valuable insights into potential price movements. This can help you decide when it's the right time to hold, buy, or convert different cryptocurrencies in your portfolio.
Fund your trading account with Cryptocurrencies today!
Now that you know the main differences between these cryptocurrencies and what factors to consider when choosing your preferred one to fund your Deriv crypto account, you’re equipped to make an informed decision. Ready to make your choice? Create your cryptocurrency account, buy crypto, and start trading!
Disclaimer:
Trading is risky. Past performance is not indicative of future results. It is recommended to do your own research prior to making any trading decisions.
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