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Despite all the market inconsistencies, investing in cryptocurrencies is becoming increasingly profitable. Many investors have been taking risks in this market, diversifying their portfolios with cryptocurrencies.
The big “problem” of investing in cryptocurrencies is in all the speculation. Many people bet on individual coins, hoping to win big and fast. But more and more people are taking a more professional and sensible approach, with planning, investing in a diverse package.
The big issue is that most people are focused on getting the cryptocurrency right that will make them rich, however it is necessary to consider the big picture, identifying the sectors within the crypto space, as with any other investment.
What are the sectors within the cryptographic market?
Within the crypto market there are many sectors in which it is possible to invest. Here we will highlight the three main and most established:
1 – Smart Contract Platforms
2 – Payment Currencies
3 – Decentralized Finance Applications (DeFi)
Every cryptocurrency comes with a goal, not all blockchain-based projects aim to create a form of value transfer. Remember, not every cryptocurrency wants to become digital money, only payment coins have that goal.
How to choose a crypto sector to invest in?
To choose a crypto sector to invest in, you need to know and identify what best suits your strategies and investor profile. So let’s analyze the main sectors.
Smart Contract Platforms
In 2021 this was one of the fastest growing sectors within the crypto market. Smart Contracts grew around +111%, boosting other sectors like DeFi and NFTs.
A smart contract is a program that automatically performs specific actions when predetermined conditions are met, within a blockchain.
These programs have been gaining more and more space in the market, allowing transactions to take place without the need for third-party validation.
Certainly the best-known sector, despite not being the most profitable, is payment currencies, it was in last place in the 2021 ranking, but with the recognition of big names in the market, such as Visa and PayPal, this sector promises to gain strength and grow in the coming years.
Payment coins are cryptocurrencies that aim to revolutionize money transfers, they use their own blockchain to instantly make internet transfers, using their cryptocurrency as a means of payment.
A currency to be considered as money must fulfill three basic functions: it must be a medium of exchange, a unit of account and a store of value. Payment currencies fulfill these functions equally, or even better, than fiat currencies, so they are considered digital money.
DeFi, despite becoming more and more prominent, is considered as a subsector of the cryptocurrency industry, it challenges traditional financial institutions.
This sector is responsible for the set of financial services and products that take place on the blockchain, such as transfers, loans or payment systems.
These services are not controlled by intermediaries such as banks or financial institutions, operations in DeFi protocols are performed and controlled by algorithms and smart contracts.
Although it is the revolutionary industry, DeFi is still establishing itself in the market, it has been advancing along with its regulations.