How many types of cryptocurrencies are there? An overview of the 9 major popular sectors and investment strategies

Cryptocurrency has developed into a vast ecosystem. The classification of cryptocurrencies depends on the perspective taken, but the market is generally divided into nine mainstream sectors based on application scenarios and technical attributes. From the mainstream BTC and ETH to emerging Meme coins, AI cryptocurrencies, DePIN, and others, each sector has unique investment characteristics and profit potentials. Understanding how these sectors operate and perform in the market is essential for becoming a long-term winner.

Understanding the Diverse Cryptocurrency Ecosystem: From Memes to DeFi

Different crypto sectors are like different industries in the stock market—technology stocks, financial stocks, traditional industries, each with their own traits. Cryptocurrencies mainly fall into categories based on core functions and use cases: some focus on payment settlement (like Solana), some on financial applications (DeFi), others on community consensus (Meme coins).

This diversification offers investment opportunities but also entails risks. Market data from the first half of 2024 clearly shows this—returns vary greatly across sectors, with the best performing sectors achieving annualized yields far above average, while underperforming sectors face capital outflows.

The Most Profitable Sectors in 2024: Why Meme Coins Are in the Spotlight

Market statistics show that Meme coins achieved the most astonishing returns in the first half of 2024. The average return for Meme coins reached 2,405.1%, 8.6 times higher than RWA (Real World Assets), and 542.5 times higher than the worst-performing DeFi sector. Such disparities reflect market perceptions of risk and reward across sectors.

The largest Meme coins include PEPE, Dogwifhat, FLOKI, and BRETT, which have sparked waves of community frenzy. Notably, cultural phenomena like “Black Myth: Wukong” have fueled related Meme coins on Solana (such as $WuKong), which surged over 99,999% in a short period, prompting profits for some savvy investors.

However, the high volatility of Meme coins hides significant risks. While short-term gains can be impressive, large investments are not recommended. Small capital participation can yield substantial returns due to volatility, but requires keen market timing.

Growth Opportunities in Real Asset Tokenization (RWA) and AI Cryptocurrencies

Prospects for Real Asset Tokenization (RWA):

RWA involves dividing tangible assets into tradable digital rights. Imagine a piece of land passed down through generations, or a luxury watch, artwork, or fine wine—these can be partially owned through tokenization. In June 2023, a Rolex watch was successfully used as collateral for a NT$400,000 loan, demonstrating the feasibility of this model.

Industry forecasts project the global RWA market to reach $16 trillion by 2030, accounting for about 10% of global GDP. This market size has attracted major asset managers like BlackRock, which launched a tokenized fund called BUIDL, signaling traditional financial institutions’ recognition. While RWA may not explode like Meme coins (due to valuation floors tied to physical assets), its long-term growth trend is irreversible.

AI Cryptocurrency with Technological Boost:

AI cryptocurrencies combine blockchain technology with artificial intelligence, optimizing transaction efficiency, enhancing security, or enabling smart contracts. For example, SingularityNET (AGIX) has built a decentralized AI economy where users can trade various AI services. Use cases include medical imaging analysis, financial fraud detection, and creative content generation.

Data from the first half of 2024 shows AI sector cryptocurrencies ranking third in returns, after Meme and RWA sectors. Notable projects include NEAR, FET, AGI, and others. Investors confident in technological progress may consider allocating some funds to explore this sector’s trends.

Gamified Finance, Privacy Protection, and the Future of Solana Ecosystem

GameFi: Merging Gaming and Finance:

GameFi combines DeFi and NFTs, giving virtual game assets rarity and true ownership. Traditional game currencies are controlled by operators, leading to inflation; blockchain games tokenize items as NFTs, which can be collateralized on DeFi platforms to earn crypto, blending entertainment with profit.

Current efforts aim to break down game barriers and build cross-game metaverse ecosystems—NFTs earned in one game can be used in others, creating a complete economic cycle. This greatly enhances asset liquidity, but in the first half of 2024, many projects like GALA showed negative returns, indicating the need for ongoing observation of this sector’s recovery.

DePIN and Privacy Protection:

Decentralized Physical Infrastructure Networks (DePIN) connect physical assets and infrastructure via blockchain in a decentralized manner. Japan’s first legally registered IoT platform, Jasmy (JASMY), exemplifies this, allowing users to control their data and share it transparently with third parties, aligning with Web3.0 privacy needs.

Potential of Solana Ecosystem Applications:

Launched just four years ago, Solana has become a key solution to Ethereum network congestion. Its innovative Proof of History (PoH) mechanism replaces Ethereum’s PoS, significantly reducing transaction costs and speeds. Importantly, Solana has gained recognition from major companies like Visa, launching Solana-based payment features using USDC stablecoin.

If Solana’s adoption broadens, future enterprises might use it for payroll, enabling people to spend directly without currency exchange. This scenario is not a dream—US dollar’s global dominance is due to its widespread acceptance for purchasing goods. If Solana reaches similar status, it could become the next “world reserve currency.”

Fundamental Differences Between DeFi and Traditional Finance

Cryptocurrencies aim to bypass traditional banking systems—highly regulated or directly controlled by governments. Traditional finance issues include currency controls, high fees, slow transactions, and funds being arbitrarily frozen. In a rapidly advancing technological era, these constraints hinder innovation.

Blockchain-based DeFi transforms transaction processes: cross-border transfers, which normally involve multiple banks and intermediaries with fees and risks of freezing funds, can be done directly peer-to-peer on blockchain, with no middlemen or delays.

While DeFi’s prospects are promising, it faces resistance because it challenges traditional financial institutions’ dominance. In the first half of 2024, due to strong stock markets, capital inflow into DeFi was limited, and overall returns across sectors were modest.

Why Follow Sector Rotation? The Key to Investment Strategy

Sector Rotation Is Normal in Markets:

The crypto market is not linear; sectors are influenced by different fundamentals, policies, and technological developments, leading to rotation effects. For example, in late 2020, Bitcoin became the focus, attracting institutional funds; early 2021, institutional investors shifted to Ethereum and its DeFi ecosystem (Uniswap, Aave), fueling rapid growth; mid to late 2021, NFT markets exploded with projects like Bored Ape Yacht Club and Axie Infinity.

From late 2022 to early 2023, Layer 2 solutions (Arbitrum, Optimism) performed well, while Layer 1 chains lagged. Recently, with the launch of spot ETFs and expectations of rate cuts, Bitcoin has driven Layer 1 chains higher, while Layer 2 remains flat. These rotations are driven by technological advances, market trends, and policy environments.

Diversified Investment and Strategic Layout:

Understanding sector rotation is crucial for maximizing returns. Instead of passively waiting, active risk diversification and analyzing historical performance across sectors at different stages can help predict future opportunities.

As the crypto space matures, different coins’ rises and falls will no longer be synchronized. Similar to stock markets, where investors ask “which sectors are rising most,” future crypto investing will focus on “which coins have the most potential.” Recognizing sector rotation patterns helps investors avoid costly mistakes like buying at peaks and selling at lows.

Essential Tools for Tracking Cryptocurrency Sector Data

To effectively monitor sector performance, investors should utilize the following platforms and tools:

1. CoinMarketCap
Features: Provides global crypto market data (prices, market cap, trading volume), with classifications for DeFi, NFT, AI cryptocurrencies, etc., enabling quick overview of sector performance.

2. Coingecko
Features: Similar to CoinMarketCap, offers detailed market data and sector-specific stats with user-friendly interface.

3. Messari
Features: Offers in-depth blockchain research reports, market analysis, and comprehensive financial data, allowing sector-specific project performance review—ideal for deep research.

These platforms showcase the diversity and characteristics of crypto sectors. Regularly following relevant info and understanding sector cycles are key to long-term market success. While classifying cryptocurrencies into sectors is important, understanding the investment logic and risks behind each category is even more crucial.