Must-read before beginner cryptocurrency investment: What is digital currency, how to choose, and what are the risks

When it comes to what is cryptocurrency, many beginners are confused. In simple terms, it is a form of currency that does not exist in physical form and is entirely supported by cryptography and internet technology. From the earliest electronic payments to today’s cryptocurrencies, governments and regulatory agencies around the world are gradually adapting to this wave.

But what really excites investors are those decentralized cryptocurrencies—like Bitcoin, Ethereum, and similar—where no single institution can control them. Currently, over 300 million people worldwide are involved in crypto, with daily trading volumes surpassing hundreds of billions of dollars. This market is truly taking off.

Which system should investors focus on: the two types of cryptocurrencies?

Central bank-issued (Central Bank Digital Currencies), like China’s Digital Yuan, are centralized, meaning the government can control them.

Community-issued (Decentralized Cryptocurrencies), like Bitcoin and Ethereum, cannot be shut down or arbitrarily issued—these are the ones investors truly care about.

Classified by market cap, similar to large-cap and small-cap stocks:

• Large-cap coins: The top few by market value, relatively stable fluctuations, most suitable for beginners, with the deepest liquidity.
• Mid-cap coins: Greater growth potential but more volatile.
• Small-cap coins: Very high risk, prone to rapid surges and crashes, even zeroing out.

Remember one thing: No matter how big a coin is, it cannot be guaranteed to be completely safe. The key depends on when you enter and how you trade.

What will the top 20 cryptocurrencies by market cap look like in 2026

Data source: CoinMarketCap, Investing (2026/01/06)

How should beginners choose digital currencies to avoid pitfalls

Two iron rules, absolutely do not violate:

❌ Avoid small-cap coins—especially those ranked beyond 100—these virtual currencies are extremely volatile, capable of evaporating your principal in minutes.

❌ Avoid projects without whitepapers, with anonymous teams, or relying solely on hype—nine out of ten are just to scam retail investors.

So, what is worth paying attention to? The large-cap coins. Specifically:

1. Bitcoin (BTC)—The most reliable entry ticket

As the “gold standard” of cryptocurrencies, Bitcoin is the best starting point for beginners.

✅ Easy to understand: The concept of store of value is simple, no need to understand complex technology.

✅ High liquidity: Largest market cap, widest acceptance, supported by global exchanges, smooth buying and selling.

✅ Institutional recognition: Companies like Tesla, MicroStrategy have already included BTC in their balance sheets.

✅ Strong technical foundation: Based on PoW consensus mechanism and decentralized nodes, with security tested over years.

✅ Natural hedge tool: During economic instability or fiat devaluation, many institutions and individuals buy BTC to preserve value.

2. Ethereum (ETH)—Balanced stability and growth

ETH is the infrastructure of the entire blockchain ecosystem, with most DeFi, NFT, and chain gaming projects running on Ethereum.

✅ Strong ecosystem support: Continuous real demand, not just empty talk.

✅ Upgrades bring benefits: Transition to PoS improves scalability, significantly reduces energy consumption, and is long-term promising.

✅ Deep liquidity: Second in market cap, small bid-ask spreads, smooth operation for beginners.

Current price: $3,220 | Market cap: $388.64B

3. Ripple (XRP)—Has clear use cases but carries risks

XRP focuses on cross-border payments, with some banks already testing it. If future cooperation expands, the price could benefit.

✅ Clear purpose: Can complete low-cost international transfers within 3-5 seconds.

✅ Low transaction fees: Each transaction fee is almost negligible.

✅ Affordable price: Compared to the sky-high price of BTC, XRP is easier for newcomers to get started.

⚠️ Risk warning: Higher centralization, unresolved US SEC litigation risk, and high price volatility—only suitable for very small allocations.

Current price: $2.24 | Market cap: $136.16B

4. Binance Coin (BNB)—Privileges within the exchange ecosystem

BNB is the platform token of Binance(, the world’s largest exchange), with practical utility.

✅ Very easy to buy: Supports multiple fiat deposits via bank cards, Alipay, etc.(, no complicated barriers.

✅ Reasonable price: Compared to BTC’s tens of thousands, BNB is more accessible for beginners.

✅ High practical value: Using BNB to pay trading fees offers discounts, saving costs long-term; also participates in new coin offerings.

✅ Relatively controllable risks: Binance’s trading volume is the largest globally, BNB liquidity is excellent, unlikely to face delisting or market crash scenarios.

✅ Stable performance: BNB’s volatility is relatively low, often the most stable among platform tokens during bull markets.

Every quarter, Binance buys back and burns BNB with profits, reducing circulating supply and supporting long-term appreciation.

) 5. Stablecoins (USDT, USDC)—Beginner practice tokens

Not interested in high volatility? Use stablecoins to practice first.

✅ Zero volatility: Pegged 1:1 to USD, price always stable.

✅ Perfect practice tools: Familiarize with exchange operations, learn transfer and withdrawal, no fear of losing money.

✅ Wide applications: Can be used as intermediary when trading other coins, earning interest on exchange deposits.

✅ Instant settlement: Real-time cross-border transfers, with much lower fees than banks.

⚠️ Coin selection advice: Prioritize USDC### for higher transparency and regulation(, rather than USDT, to avoid high-yield stablecoins issued by small platforms.

USDC current price: $1.00 | Market cap: $75.67B

What are the advantages and disadvantages of cryptocurrencies

) Advantages: Why more and more people are optimistic

🟢 Once rules are set, they cannot be changed

Code determines everything. Issuance amount and trading rules are written into the code from the start, and no one—including the developers—can change them. This prevents issues like hyper-issuance and abuse common in traditional fiat.

🟢 Transaction trust is guaranteed by network consensus

Each transaction requires confirmation by the entire network to be valid, without third-party credit agencies. Highest transparency, lowest cost.

🟢 Stronger liquidity

Not only can institutions transfer funds to users, but users can also trade freely with each other. Many counterparties, deep liquidity, small bid-ask spreads.

🟢 Save money and time

Distributed ledger eliminates intermediaries, significantly reducing transaction costs and delays. Cross-border transfers that took days now take minutes.

🟢 More direct policy implementation

Central bank digital currencies can directly pay benefits and subsidies to residents in the future, without intermediaries like banks.

Disadvantages: Current insurmountable issues

🔴 Natural deflationary currency

Fixed total supply, cannot be increased, which is not good for economic development. When large-scale applications occur, this issue will become prominent.

🔴 Price volatility is too high

Bitcoin can surge 20% today and plunge 15% tomorrow, completely unpredictable. Not very stable as a store of value or medium of exchange. Any small event can trigger rapid surges or crashes.

🔴 Lost private keys cannot be recovered

Your digital wallet is like your bank. Forget the password? Sorry, your funds are gone forever. No customer service, no manual recovery—truly “once lost, forever lost.”

Final words

Digital currencies are changing the rules of global finance. They break geographical barriers, allowing anyone worldwide to transfer funds instantly at low cost. Central banks and large corporations are actively deploying their own digital currency strategies, indicating this is the definite direction.

In the coming years, the crypto market will continue to attract new users, with ongoing technological innovation and upgrades. As a beginner, there’s no need to rush all-in; start with large-cap coins like BTC, ETH, and stablecoins, complete the trading process, accumulate experience, and only increase your investment once you truly understand.

Are you ready to step into the world of digital finance?

1. Create an account—Fill in basic information, done in minutes.

2. Deposit funds—Quickly top up via bank card, Alipay, etc.

3. Start trading—Discover opportunities and place orders on professional platforms like Gate.io.