Cryptocurrency is well established as a mainstream investment vehicle, largely thanks to the popularity of Bitcoin. But Bitcoin is not the only crypto asset gaining traction. There are hundreds of different altcoins, some more popular and stable than others. What is an alternative currency? Really, it is any other crypto asset outside of Bitcoin; however, serious investors generally only bundle stable and established crypto assets under this umbrella.
If you’re interested in investing in cryptocurrencies but want to avoid the hype surrounding Bitcoin, consider an altcoin. From stablecoins to utility tokens, there are plenty of opportunities out there. Here’s a look at altcoins and why investors are flocking to them as Bitcoin paves the way for crypto stability.
Bitcoin (BTC) is by far the most popular cryptocurrency out there. However, at over $30k per coin, most investors can only afford to invest in a fraction of Bitcoin. Instead, they flock to similar promising coins for alternative crypto investments. There is a sea of cryptocurrencies, including popular favorites like Ethereum (ETH) and Litecoin (LITE), trading for much less than Bitcoin.
There is also a small thriving market for upstart altcoins. Currencies structured similarly to Bitcoin and Ethereum offer the promise of future growth in the early stages of mining, when it is possible to accumulate tokens that are worth very little. Many investors buy young cryptocurrencies in the hope that they will be the “next Bitcoin”. Unfortunately, there are more scam coins and unstable coins than there are viable cryptocurrencies. Altcoin investors need to be careful.
Types of altcoins to consider
Before investing in altcoins, investors should know what type of crypto asset they are investing in. Most people tend to consider all crypto assets as currency, but there are different types of coins, as well as chips to take into account. Some of the most popular include:
- stable coins. While true cryptocurrencies are not tied to any other assets, stablecoins are. They are pegged to fiat currency, a commodity, or even other cryptocurrencies. Stablecoins tend to experience less volatility, but also grow at a much slower rate.
- Miner coins. Bitcoin is the most famous example of a mining currency. These currencies exist when computers solve logical problems and provide proof of work, known as the blockchain. Coins become exponentially more difficult to mine as time goes on and the supply increases.
- Security sheets. Brought to market through ICOs, these tokens are traded like securities and serve as digital capital in something. They may entitle the holder to a dividend from the company or voting rights. They are increasingly popular with tech startups.
- Utility tokens. These tokens are valid within a network for a specific purpose. For example, you can redeem utility tokens to pay for server time or use software. Their purpose gives them value and they are usually issued by the source of redemption.
As the cryptocurrency market grows, more and more altcoins are emerging. As they do so, they take on different forms, each offering some kind of value to the headline.
Most Popular Altcoins (2021)
While it is almost impossible to account for all the new cryptocurrencies and altcoins that appear each year, there are some that rise in popularity and value. These tend to be stablecoins (other than stablecoins) that are well moderated and designed to control inflation and dilution. Some of the most popular altcoins in recent years include:
- Ethereal (ETH)
- Litecoin (LITE)
- Cardan (ADA)
- Chain link (LINK)
- Uniswap (UNI)
- Stellar (XLM)
- AAVE (AAVE)
These cryptocurrencies range from pennies to thousands of dollars, representing the range of opportunities within the altcoin market. Furthermore, the crypto landscape is changing so much that a year from now, there is likely to be a new wave of stable and profitable altcoins.
The Pros of an Altcoin Investment
For those interested in an alternative investment, altcoins are a great opportunity. While volatility is a concern in the crypto markets, altcoins are benefiting from tremendous investor sentiment, which means everyone is looking for the next Bitcoin. Even the smallest micro cap coins have the opportunity to gain incredible momentum and grow.
Altcoins are also great because they are generally not affected by peripheral markets. As such, they are a great hedge against traditional markets, such as the stock market or the foreign exchange market. This also means that they are less subject to regulation, allowing for a more natural development of altcoins as investors become interested in them.
The drawbacks of altcoins as investments
the big drawbacks of altcoins they are the same as any crypto asset. First, they are new and not well understood by the common investor. This can mean poor decision making when investing. Second, the great volatility of the crypto market can result in major swings, especially for less stable altcoins. Finally, there is a threat of market manipulation by bad actors. Small coins with momentum tend to attract pump-and-dump scammers or those who inflate the price with the intention of crashing it. All in all, cryptocurrencies remain an untamed and unpredictable market.
Are altcoins a safe investment?
What is an alternative currency? Really, any crypto asset outside of Bitcoin is an altcoin, but that doesn’t mean all altcoins are viable. Altcoins represent an opportunity for investors to enter the crypto markets at a lower entry point than Bitcoin and with more upside. The popularity and support of many altcoins has made them a staple in the portfolios of many modern investors.
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Should you invest in altcoin? It really depends on your risk tolerance and understanding of these investments. If you know how they work and have an appetite for the sometimes volatile world of crypto assets, opening an altcoin position is not a bad idea. Just be sure to avoid meme coins and crypto assets destined for implosion due to poor fundamentals. If it’s too good to be true, it probably is.