What are Altcoins? Everything you need to know about altcoins!
The Bitcoin is the most well-known cryptocurrency, but there are also hundreds of other cryptocurrencies. All of these cryptocurrencies are grouped under the term “altcoin.” In this article, you will discover what altcoins are and how to invest in them.
What are altcoins?
Bitcoin was the first cryptocurrency, launched in 2009. However, since 2011 there have been other cryptocurrencies known as “altcoins.” Simply put, altcoins are all the cryptocurrencies that are not Bitcoin.
There are different types of altcoins, just as there are different types of regular currencies. Each altcoin has its own name and value.
What types of altcoins are there?
- Payment tokens: This type of token is used for making payments. Bitcoin is the most well-known example of this type of token.
- Stablecoins: Stablecoins track the value of an underlying fiat currency. You can invest in a cryptocurrency such as the euro with stablecoins.
- Utility tokens: This type of crypto provides a certain service within a crypto-project. You can use utility tokens, for example, to gain access to a server to perform calculations.
- Governance tokens: With this type of token, you can vote on the policies of a crypto-project.
- Security tokens: With this type of token, you can invest in things like stocks or real estate. The token represents the underlying asset in which you can invest.
- Memecoin: These are cryptocurrencies without a clear purpose that primarily rise in value due to media attention. A good example of this is Dogecoin.
How can you invest in altcoins?
It can be interesting to invest in altcoins. You can invest in altcoins by opening an account with a reputable crypto exchange. In the overview below, you can see which crypto exchanges you can use.
What are the benefits of altcoins?
- Improvements: altcoins often improve existing ideas, making the cryptocurrency market as a whole better.
- Wide variety: you can choose from thousands of different altcoins, so there is something for everyone.
- Higher potential profits: altcoins are initially worth little, so you potentially can achieve high returns.
What are the disadvantages of altcoins?
- Volatility: the prices of altcoins often fluctuate (even more) than Bitcoin. This can cause you to lose a lot of money in a short period of time.
- Regulations: governments pay extra attention to altcoins and ICOs. Disadvantageous regulations can put pressure on the prices of altcoins.
- Scams: many altcoins are scams, so do thorough research before investing in a new cryptocurrency. You often only find quality altcoins on reliable crypto exchanges.
- Less liquid: altcoins are less popular, so it can be more difficult to trade them.
How do you select a good altcoin?
Step 1: Visit the website & research the team
A new cryptocurrency stands or falls with a good development team. Therefore, visit the website of the crypto project and research whether the people behind the cryptocurrency have sufficient experience. Does the website use stock photos of non-existent people? Then it is better not to invest in this altcoin.
Step 2: Read the whitepaper
In the whitepaper, the team behind the crypto describes the goal of the project. If the whitepaper is poorly written or missing, it is better not to buy the altcoin.
Step 3: Check the Roadmap
In the roadmap, you can see what the developer’s plans are for the future. If the roadmap is too vague or unrealistic, it’s best to stay away from the altcoin.
Step 4: Analyze the Function
Analyze whether the altcoin adds sufficient value. If an altcoin simply copies an existing cryptocurrency, the crypto probably adds too little value. There is then little chance that the coin will become more valuable in the future.
Altcoins and Bitcoins
Altcoins and Bitcoins are often confused with each other. This is not surprising, as they are both cryptocurrencies.
The main difference between a random altcoin and Bitcoin is that Bitcoin is the founder of the cryptocurrency phenomenon. The coins (digital currencies) that were developed after Bitcoin are simply alternative coins. These coins are also called Alternative Coins and therefore Altcoins.
Bitcoin is still the dominant cryptocurrency. Because Bitcoin was the first, you see that this crypto is also the most valuable. The dominance of Bitcoin has decreased over time due to the rise of altcoins.
Examples of Altcoins
Since the introduction of Bitcoin, thousands of different digital currencies have been developed. These are all Altcoins. The first official Altcoin was Namecoin. This was the second cryptocurrency, or the first coin developed after Bitcoin.
In addition to Namecoin, there are many other well-known altcoins, including Ethereum, Litecoin, Ripple, and Dash. Because almost anyone can develop and market their own altcoin, the supply of altcoins is incredibly large.
Below, I discuss some well-known altcoins:
- Ethereum: this decentralized platform allows users to develop new applications.
- Binance Coin: this cryptocurrency issued by Binance offers various unique features.
- Litecoin: similar to Bitcoin but faster.
- Ripple: a central cryptocurrency designed to make international payments cheaper.
- Dogecoin: this well-known altcoin became very popular due to the influence of Elon Musk.
Tips for investing in altcoins
If you want to invest in altcoins, you first need to decide which coin you want to invest in. Ideally, this is a coin that is currently not worth much but will increase significantly in the future.
Investing in altcoins is always speculative. You don’t know if an altcoin will actually become ‘big’ and generate high returns.
You can also physically buy altcoins. One disadvantage of physically buying altcoins is that you are responsible for the security of the coin yourself. However, it can be attractive to buy altcoins, especially if you expect them to rise over a longer period of time.
Do you want to try trading altcoins for free with a demo? Then compare the best crypto demos:
When to buy or sell Altcoins?
It’s not easy to determine when to buy or sell Altcoins. As a rule of thumb, you can use the fact that Altcoins are strongly connected to Bitcoin. When Bitcoin is doing well, Altcoins rise, and when Bitcoin is doing poorly, Altcoins mostly fall.
However, this rule does not always apply. In the past, Altcoins have sometimes performed exceptionally well. This happens especially quickly when very positive news comes out about a certain coin. For example, Ripple rose extremely strongly when it became clear that the coin received support from certain banks.
So, determining the best buying or selling moment for Altcoins is not easy. Try to closely follow some Altcoins and see which factors influence their price.
What is the best altcoin?
There is no best altcoin to be designated. The best altcoin for you may not be the best altcoin for me. Therefore, consider for yourself in which technology you have the most confidence. This is probably the cryptocurrency in which you can invest best.
