Why is bitcoin rising and ethereum not

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Ryan Dunn, certified financial planner and wealth manager at Novi Wealth, says crypto investors should watch the Fed closely. If the Fed raises rates higher or longer than the market anticipates, crypto prices could easily reverse course and head lower once again. Crypto markets could also experience significant volatility associated with the release of the January consumer price index CPI inflation reading on February 14 and the January core personal consumption expenditures price index PCE inflation reading on February Wayne Duggan is a Forbes Advisor contributor.

He is also a staff writer at Benzinga, where he has reported on breaking financial market news and analyst commentary related to popular stocks since Duggan is a graduate of the Massachusetts Institute of Technology and resides in Biloxi, Mississippi.

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Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication.

Past performance is not indicative of future results. Forbes Advisor adheres to strict editorial integrity standards. Individual units of cryptocurrencies can be referred to as coins or tokens, depending on how they are used. Some are intended to be units of exchange for goods and services, others are stores of value, and some can be used to participate in specific software programs such as games and financial products. How does Bitcoin work? One common way cryptocurrencies are created is through a process known as mining, which is used by Bitcoin.

Bitcoin mining can be an energy-intensive process in which computers solve complex puzzles in order to verify the authenticity of transactions on the network. As a reward, the owners of those computers can receive newly created cryptocurrency. Other cryptocurrencies use different methods to create and distribute tokens, and many have a significantly lighter environmental impact. For most people, the easiest way to get cryptocurrency is to buy it, either from an exchange or another user.

To get a sense of the world of cryptocurrency, it can help to get familiar with the most commonly traded assets in the space. Below is a list of major cryptocurrencies by market capitalization. While Bitcoin is the first and most valuable cryptocurrency, the market is large.

More than 22, different cryptocurrencies are traded publicly, according to CoinMarketCap. And while some cryptocurrencies have total market valuations in the hundreds of billions of dollars, others are obscure and essentially worthless. NerdWallet has created guides to some widely circulated cryptocurrencies, including Bitcoin and some altcoins , or Bitcoin alternatives:.

Bitcoin is the first and most valuable cryptocurrency. Ethereum is commonly used to carry out financial transactions more complex than those supported by Bitcoin. Cardano is a competitor to Ethereum led by one of its co-founders. Litecoin is an adaptation of Bitcoin intended to make payments easier. Solana is another competitor to Ethereum that emphasizes speed and cost-effectiveness. Dogecoin began as a joke but has grown to be among the most valuable cryptocurrencies.

Shiba Inu is another dog-themed token with more complex mechanics. Stablecoins including Tether and USDC are a class of cryptocurrencies whose values are designed to stay stable relative to real-world assets such as the dollar.

Thoughtfully selecting your cryptocurrency, however, is no guarantee of success in such a volatile space. Sometimes, an issue in the deeply interconnected crypto industry can spill out and have broad implications on asset values. For instance, in November of the market took a major hit as the cryptocurrency exchange FTX struggled to deal with liquidity issues amid a spike in withdrawals. As the fallout spread, cryptocurrencies both large and small saw their values plummet.

Whether or not cryptocurrency is a security is a bit of a gray area right now. To back up a little, generally, a "security" in finance is anything that represents a value and can be traded. Stocks are securities because they represent ownership in a public company.

Bonds are securities because they represent a debt owed to the bondholder. And both of these securities can be traded on public markets. Regulators are increasingly starting to signal cryptocurrencies should be regulated similarly to other securities, such as stocks and bonds. But this take is receiving pushback; scholars, legal firms and some of the biggest players in the crypto industry have argued against this, claiming the rules that apply to stocks and bonds, for example, don't apply as broadly to cryptocurrencies.

Most recently, the Securities and Exchange Commission set its sights on crypto staking , arguing the rewards earned via staking should be registered as securities [0] SEC. In Feb. Whether the SEC will treat cryptocurrencies, or specific types of cryptocurrencies, as securities will be at the forefront of crypto regulation, and could have major implications for the asset class in the near future.

NFTs , or non-fungible tokens, are digital assets that convey ownership of what could be considered an original copy of a digital file. They share many similarities with cryptocurrencies, and they can be bought and sold in many of the same marketplaces. However, NFTs are different from cryptocurrencies due to that unwieldy word in their name: non-fungible. Cryptocurrencies are fungible, so any unit of a specific cryptocurrency is basically the same as any other.

My one Bitcoin has the same value as your one Bitcoin. Here are our picks for best cryptocurrency exchanges. Cryptocurrency inspires passionate opinions across the spectrum of investors. Here are a few reasons that some people believe it is a transformational technology, while others worry it's a fad. Some supporters like the fact that cryptocurrency removes central banks from managing the money supply since over time these banks tend to reduce the value of money via inflation.

In communities that have been underserved by the traditional financial system, some people see cryptocurrencies as a promising foothold. Pew Research Center data from found that Asian, Black and Hispanic people "are more likely than White adults to say they have ever invested in, traded or used a cryptocurrency.

Accessed Apr 19, Some cryptocurrencies offer their owners the opportunity to earn passive income through a process called staking. Crypto staking involves using your cryptocurrencies to help verify transactions on a blockchain protocol. Though staking has its risks, it can allow you to grow your crypto holdings without buying more. Many cryptocurrency projects are untested, and blockchain technology in general has yet to gain wide adoption. If the underlying idea behind cryptocurrency does not reach its potential, long-term investors may never see the returns they hoped for.

For shorter-term crypto investors, there are other risks. Its prices tend to change rapidly, and while that means that many people have made money quickly by buying in at the right time, many others have lost money by doing so just before a crypto crash.

Those wild shifts in value may also cut against the basic ideas behind the projects that cryptocurrencies were created to support. For example, people may be less likely to use Bitcoin as a payment system if they are not sure what it will be worth the next day. The environmental impact of Bitcoin and other projects that use similar mining protocols is significant. A comparison by the University of Cambridge, for instance, said worldwide Bitcoin mining consumes more than twice as much power as all U.

Some cryptocurrencies use different technology that demands less energy. Governments around the world have not yet fully reckoned with how to handle cryptocurrency, so regulatory changes and crackdowns have the potential to affect the market in unpredictable ways. The question of whether cryptocurrencies are legally allowed, however, is only one part of the legal question. Other things to consider include how crypto is taxed and what you can buy with cryptocurrency.

Legal tender: You might call them cryptocurrencies, but they differ from traditional currencies in one important way: there's no requirement in most places that they be accepted as "legal tender. El Salvador in became the first country to adopt Bitcoin as legal tender.

For now, in the U. Crypto taxes: Again, the term "currency" is a bit of a red herring when it comes to taxes in the U. Cryptocurrencies are taxed as property, rather than currency. That means that when you sell them, you'll pay tax on the capital gains, or the difference between the price of the purchase and sale.

And if you're given crypto as payment пїЅ or as a reward for an activity such as mining пїЅ you'll be taxed on the value at the time you received them. Cryptocurrency is a relatively risky investment, no matter which way you slice it. You may want to look first to shore up your retirement savings, pay off debt or invest in less-volatile funds made up of stocks and bonds.

There are other ways to manage risk within your crypto portfolio, such as by diversifying the range of cryptocurrencies that you buy. Crypto assets may rise and fall at different rates, and over different time periods, so by investing in several different products you can insulate yourself пїЅ to some degree пїЅ from losses in one of your holdings.

Learn how to get started. Perhaps the most important thing when investing in anything is to do your homework. This is particularly important when it comes to cryptocurrencies, which are often linked to a specific technological product that is being developed or rolled out.

When you buy a stock, it is linked to a company that is subject to well-defined financial reporting requirements, which can give you a sense of its prospects. Cryptocurrencies, on the other hand, are more loosely regulated in the U. If you have a financial advisor who is familiar with cryptocurrency, it may be worth asking for input. For beginning investors, it can also be worthwhile to examine how widely a cryptocurrency is being used. Most reputable crypto projects have publicly available metrics showing data such as how many transactions are being carried out on their platforms.

If use of a cryptocurrency is growing, that may be a sign that it is establishing itself in the market. Cryptocurrencies also generally make "white papers" available to explain how they'll work and how they intend to distribute tokens.

These are the top crypto wallets. If you're looking to invest in less established crypto products, here are some additional questions to consider:. An identifiable and well-known leader is a positive sign. Are there other major investors who are investing in it?

Will you own a portion in the company or just currency or tokens? This distinction is important. Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.

Be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to bilk investors.

Most cryptocurrencies are based on blockchain technology , a networking protocol through which computers can work together to keep a shared, tamper-proof record of transactions. The challenge in a blockchain network is in making sure that all participants can agree on the correct copy of the historical ledger.

Without a recognized way to validate transactions, it would be difficult for people to trust that their holdings are secure. There are several ways of reaching "consensus" on a blockchain network, but the two that are most widely used are known as "proof of work" and "proof of stake.

Consider, that cryptocurrency leads reddit logically

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Ether and bitcoin are similar in many ways: Each is a digital currency traded via online exchanges and stored in various types of cryptocurrency wallets. However, there are many significant differences. While bitcoin is designed as a currency and a store of value, the Ethereum network is intended for complex smart contracts and decentralized applications.

Bitcoin was launched in January It introduced a novel idea set out in a white paper by the mysterious Satoshi Nakamoto пїЅBitcoin offers the promise of an online currency that is secured without any central authority, unlike government-issued currencies. There are no physical bitcoins, only balances associated with a cryptographically secured public ledger.

Although Bitcoin was not the first attempt at an online currency of this type, it was the most successful in its early efforts. As a result, it has become known as the predecessor to virtually all cryptocurrencies that have emerged over the past decade.

Over the years, the virtual, decentralized currency concept has gained acceptance among regulators and government bodies. Blockchain technology is being used to create applications that go beyond just enabling a digital currency. Launched in July , Ethereum is the largest and most well-established, open-ended decentralized software platform. Ethereum enables building and deploying smart contracts and decentralized applications dApps without downtime, fraud, control, or interference from a third party.

To accomplish this, Ethereum comes complete with its own programming language that runs on a blockchain. The potential applications of Ethereum are wide-ranging and are powered by its native cryptographic token, ether commonly abbreviated as ETH. In , Ethereum launched a presale for ether, which received an overwhelming response. Ether is used mainly for four purposes: It is traded as a digital currency on exchanges, held as an investment, used to purchase goods and services, and used on the Ethereum network to pay transaction fees.

While both the Bitcoin and Ethereum networks are powered by the principle of distributed ledgers and cryptography, the two differ technically in many ways. For example, transactions on the Ethereum network may contain executable code, while data affixed to Bitcoin network transactions is only used to record transaction information. The Bitcoin and Ethereum blockchains and networks are different concerning their overall aims.

Bitcoin was created as an alternative to national currencies and thus aspires to be a medium of exchange and a store of value. Ethereum was intended as a platform to facilitate immutable, programmatic contracts and applications via a global virtual machine. Bitcoin uses a consensus protocol called proof of work PoW , which allows the network nodes to agree on the state of all information recorded and prevent certain types of attacks on the network.

In September , Ethereum moved to proof of stake PoS , a set of interconnected upgrades that will make Ethereum more secure and sustainable. To address issues regarding scalability, part of the transition to proof of stake is sharding, which will continue to be addressed through A major criticism of proof of work is that it is highly energy-intensive because of the computational power required.

Proof of stake substitutes computational power with stakingпїЅmaking it less energy-intensiveпїЅand replaces miners with validators, who stake their cryptocurrency holdings to activate the ability to create new blocks.

BTC and ETH are both digital currencies, but the primary purpose of ether is not to establish itself as an alternative monetary system but to facilitate and monetize the operation of the smart contract, dApps, and any other blockchain solution that can be thought of. The Ethereum ecosystem is growing by leaps and bounds thanks to the surging popularity of its dApps in areas such as finance decentralized finance , or DeFi apps , arts and collectibles non-fungible tokens , or NFTs , gaming, and technology.

Ethereum will also introduce sharding sometime in to enhance its scalability. Bitcoin has also experienced change, introducing the Taproot upgrade to enable smart contracts. The Bitcoin Lightning Network is another project being worked on as a second-layer protocol that intends to take transactions off-chain for the purpose of speeding up the network. It remains anyone's guess which cryptocurrency and blockchain will stand the test of timeпїЅperhaps they both will.

But one thing is certainпїЅboth have induced much-needed discussions about financial systems worldwide. Bitcoin is primarily designed to be an alternative to traditional currencies and hence a medium of exchange and store of value.

Ethereum is a programmable blockchain that finds application in numerous areas, including DeFi, smart contracts, and NFTs.

Ethereum is compared with digital silver because it is the second-largest cryptocurrency by market cap and, like the precious metal, has a wide variety of applications. As of Aug. Ether and bitcoin are alike in many ways. Each digital currency is traded on online exchanges and stored in cryptocurrency wallets.

Both are decentralized, meaning they are not issued or regulated by a central bank or other authority, and both use blockchain technology. Ethereum Foundation Blog. We think bitcoin had the first-mover advantage. But in terms of long-term technology, we think ethereum will surpass bitcoin because if you look at developers, all the developers now are pretty much using ethereum.

Ethereum has 10 times more monthly active developers than bitcoin. Bitcoin is really now, purely, in my opinion, just a digital store value, digital gold, and I view ethereum as the next internet as Web3. We do have bitcoin to thank for being the first to spark interest. Ultimately we get past the single functionality store value that is bitcoin and we get into a world where there are greater use cases пїЅ and that always trumps a single function which is an asset or a storage value. The usual [fear, uncertainty, and doubt] can come out of nowhere and hammer down the crypto class as a whole, but some assets will be able to de-couple from the downside simply because the market participants don't care or see the current news having a long-term impact, likely due to their faith in the underlying technology.

Governments proposing higher cap gains tax doesn't make any of the blockchain tech less desirable. Check out: Personal Finance Insider's picks for best cryptocurrency exchanges. Read next. Search markets. News The word News. My Watchlist. Insider logo The word "Insider".

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