With Bitcoin becoming more common, its value has skyrocketed. But what about all the other cryptocurrencies out there? We will discuss what it takes to make a cryptocurrency valuable and how you can tell if an altcoin is worth it.
Most altcoins are forks of Bitcoin with minor changes to their underlying code.
Most altcoins, or alternative cryptocurrencies, are Forks of bitcoins It is highly unlikely that an altcoin will surpass Bitcoin in market capitalization. Apart from being the first digital currency to gain popularity, Bitcoin has also maintained its dominance due to several key features. These include:
- Largest market capitalization
- Largest network effect (most developers, largest user base)
- The most secure blockchain
- higher liquidity among all cryptocurrencies
Altcoins generally do not have any intrinsic value like Bitcoin
Bitcoin and other altcoins are digital currencies that are not backed by any central authority. Most of the time, “altcoin” refers to cryptocurrencies after Bitcoin. While there are no hard and fast rules about what makes a cryptocurrency valuable, there are several important factors:
- Altcoins are not backed by anything. Their price is completely determined by how many people want them. In contrast, Bitcoin has an underlying utility in terms of being useful as a payment protocol or a store of value (like gold).
- The most widely used cryptocurrencies will always be considered more valuable than others.
Things to consider before investing in an altcoin
Before to invest on an altcoin, you should consider the following:
- The backstory of the developers. You want to make sure that the development team behind your chosen altcoin has a strong and consistent track record of improving your cryptocurrency. Is it actively developing? Do you have a diverse group of collaborators? Do you have previous experience working together on other projects?
- How many people are using it? If only a few thousand people use an altcoin, its price can be artificially inflated due to low supply and high demand. That is the case for virtually all altcoins out there today and in the future.
An altcoin will have a different value than Bitcoin
One of the most critical factors in the value of an altcoin is the amount of Bitcoin it can be exchanged for. Most altcoins they are not as valuable as Bitcoin, and less valuable means less demand for them.
As we have seen, if you have less demand for something, it has a lower price. Therefore, the higher the supply of an altcoin, the more people who own or sell it, the lower its price.
Altcoins are generally less secure than Bitcoin because they don’t have a fixed supply like BTC. They also don’t have as much market adoption or recognition around the world.
Altcoins may be valuable, but they have a different value than Bitcoin. The market capitalization of an altcoin is mainly derived from speculation.
If you want to invest in altcoins, there are some important things to consider before making any decision.
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