Understanding Crypto Assets from Scratch: How to Choose the Right Digital Currency Investment Logic

What Are Crypto Assets Anyway

The concept of Crypto is not new. From early electronic payment systems to today’s blockchain technology, regulatory frameworks around the world are continuously evolving. The “digital currency” that investors refer to actually denotes cryptographic assets that are generated through cryptography and P2P network technology, and circulate on the internet via computer programs.

Unlike traditional centralized digital payment systems (such as PayPal), decentralized Crypto relies on a distributed network of nodes to operate, without the need for third-party endorsement. Currently, there are over 20,000 types of Crypto in circulation worldwide, with an average daily trading volume exceeding one hundred billion dollars and a user base of over 300 million. More and more enterprises are beginning to accept Crypto as a payment method.

Investment Logic Based on Market Cap Segmentation

Crypto can be divided into three categories based on market cap size, corresponding to different risk levels:

Large-cap Coins — Huge market cap, ample liquidity, relatively controllable risk, ideal for beginners.

Mid-cap Tokens — More volatile but with clearer growth potential, suitable for investors with strong risk tolerance.

Small-cap Tokens — Lack liquidity support, prone to sharp declines, extremely high risk, beginners should avoid.

Top 20 Mainstream Cryptocurrencies by Market Cap

Data updated on: December 24, 2025

Beginner Investment Roadmap: How to Choose Coins Correctly

First Principle: Prioritize Mainstream Large-cap Coins

Beginners should avoid the following two pitfalls:

1. Stay away from coins ranked outside the top 100 by market cap — Lack liquidity, highly volatile, difficult to sell during sell-offs, risking principal loss.

2. Beware of projects with high concepts but low transparency — No whitepaper, anonymous teams, purely hype-driven coins, often used as tools for “harvesting” retail investors.

Four Core Investment Targets

1. Bitcoin (BTC) — The “Anchor” of Crypto Assets

Why is BTC most suitable for beginners?

✔️ Low Entry Barrier — As the value anchor of the Crypto market, its concept is simple and straightforward, no need to understand complex technology in depth.

✔️ Deep Liquidity — Supported by all global exchanges, unmatched market depth, ready for buying and selling.

✔️ Institutional Endorsement — Major companies like Tesla, MicroStrategy have incorporated BTC into their asset portfolios, accelerating institutionalization.

✔️ Technical Fortress — Based on PoW consensus mechanism and global distributed nodes, its security has been tested thoroughly, nearly tamper-proof.

✔️ Hedge Value — During global economic turbulence and fiat currency devaluation, BTC often acts as a “black swan hedge.”

2. Ethereum (ETH) — The Infrastructure of Blockchain Ecosystem

Why is ETH worth holding alongside BTC?

✔️ Essential Ecosystem — Most innovative applications like DeFi, NFT, on-chain gaming are built on Ethereum, with ongoing demand for usage.

✔️ Upgrade Potential — Transition to PoS consensus mechanism significantly improves scalability and reduces energy consumption, with clear long-term development direction.

✔️ Trading Convenience — Ranked second by market cap, with abundant trading pairs, easy for beginners to operate.

3. Ripple (XRP) — The Experiment Field for Cross-border Payments

Investment logic and risk considerations for XRP:

✔️ Clear Use Cases — Ripple network focuses on cross-border payments for financial institutions, capable of low-cost international remittances within 3-5 seconds, some banks have adopted its protocol.

✔️ Technical Advantages — Can process 1500 transactions per second, far surpassing Bitcoin and Ethereum, suitable for high-frequency trading.

✔️ Affordable Price — Lower per-unit price reduces entry barrier for beginners.

⚠️ Risk Warning — XRP is relatively centralized, ongoing regulatory lawsuits are unresolved, highly volatile, only small positions are recommended.

4. Mainstream Stablecoins (USDT, USDC) — Practice Grounds for Beginners

Why start with stablecoins?

✔️ Zero Volatility — 1:1 pegged to USD, stable price, ideal for familiarizing with exchange interfaces and transfer operations.

✔️ Trading Hub — As the quote basis for major trading pairs, trading other coins with stablecoins is more convenient.

✔️ Cross-border Settlement — Compared to bank transfers, stablecoins enable instant cross-border transfers with lower fees.

✔️ Market Safe Haven — During bear markets, investors often convert assets into stablecoins for preservation, waiting for buying opportunities.

✔️ Earning Income — Holding USDT or USDC on certain platforms can earn interest.

⚠️ Selection Tips — Prefer regulated and transparent stablecoins (like USDC), avoid high-yield stablecoins issued by small platforms to prevent risks of collapse.

The Mechanism Advantages and Practical Challenges of Crypto Assets

Why is Crypto worth paying attention to?

◾ Immutable Transparency

The issuance and trading rules of Crypto are embedded in code at the initial design, unchangeable by anyone. This fundamentally prevents inflation and over-issuance common in traditional currencies, ensuring long-term asset stability.

◾ Trust Based on Consensus Mechanisms

Each transaction must be verified and reached consensus by the entire network of nodes before it takes effect. The process is fully transparent and traceable, eliminating reliance on intermediaries, minimizing transaction costs.

◾ Flexible Two-way Circulation

Crypto can circulate freely between individuals without geographical restrictions. Countries like Japan have already permitted real estate transactions using BTC, expanding application scenarios.

◾ Cost Advantages in Cross-border Payments

Traditional bank transfers involve multiple intermediaries with high fees. Crypto leverages decentralized networks for direct settlement, greatly reducing transfer costs and time.

Current Limitations That Cannot Be Overcome

Inherent Deflationary Risk

Total supply of Crypto is fixed and cannot be increased. Lacking mechanisms to adjust currency supply during economic growth may lead to deflation, which is detrimental to economic development.

Price Volatility

Compared to gold and other precious metals’ stability, Crypto lacks a stable value standard. Any sudden event can trigger sharp price swings, making investment losses unpredictable and hard to control.

Catastrophic Consequences of Key Loss

Crypto assets stored in digital wallets are lost forever if the private key is forgotten. This poses a huge challenge for ordinary users and is a major barrier to adoption.

Market Outlook and Investment Considerations

Central banks and regulators worldwide are accelerating the deployment of Crypto ecosystems, which itself signals mainstream recognition. The launch of central bank digital currencies (CBDCs) will further regulate the market and reduce risks.

In the foreseeable future, the Crypto ecosystem will continue to attract new users, and technological innovations will keep breaking existing limits. Investors who follow the correct coin selection logic—prioritizing large-cap assets, avoiding risky projects, and managing risks well—can achieve relatively steady returns amid this wave.

Remember: The first step in Crypto investment is always choosing mainstream assets that have stood the test of time, with sufficient liquidity and clear application scenarios.