Even though Bitcoin is currently the most popular cryptocurrency, there are other digital assets known as altcoins. These altcoins stand out from Bitcoin and Ethereum by offering new features or serving different purposes. For example, while Bitcoin uses the SHA-256 proof-of-work consensus algorithm, many altcoins employ different protocols, such as Ethash, Scrypt, and Ouroboros for Ethereum, Litecoin, and Cardano respectively.
Altcoins are the upgraded versions of the original cryptocurrencies they are based on or compete with. Altcoins that have more usefulness are more likely to succeed, just like Ethereum’s ether. As an investor, you have a wide range of altcoins to choose from, each performing different functions in the crypto economy.
An altcoin, a blend of “alternative” and “coin,” refers to all non-Bitcoin cryptocurrencies and tokens. They are created by developers with distinct visions, belonging to specific blockchains. Many are Bitcoin or Ethereum forks, while others use different transaction verification methods.
Litecoin, the first altcoin, forked from Bitcoin in 2011, utilizes Scrypt for faster, energy-efficient consensus. Ether, not derived from Bitcoin, supports Ethereum’s virtual machine, rewarding transaction validation with ETH. Popular altcoins include:
- USD Coin
- Binance USD
These digital assets offer diverse opportunities and functions in the crypto economy.
How To Maximize Altcoins Investing
To maximize altcoin investments, it’s essential to gain knowledge about the market and the coins you’re interested in. One effective way to enhance your crypto investments is by learning about technical analysis, which can provide valuable insights into price movements and trends. However, it’s not just about chart patterns and indicators; keeping an eye on global events and updates that are market-moving and can impact the financial market through the economic calendar is equally important. By utilizing the calendar, traders gain insights into market trends and anticipate moves. Awareness of events and indicators fosters informed decisions, providing an edge in trading. For instance, you can track the 50-day SMA for bullish signals and compare an altcoin’s current price to its ATH for better trading decisions.
Diversify Your Investments
Cryptocurrency markets can be highly volatile due to various events, making it risky to put all your funds in one currency. Clarify your intent for each coin. Are you seeking quick short-term gains, or aiming for long-term value? Different objectives will guide your choice of altcoins. To mitigate risks, consider diversifying your investments across multiple altcoins, spreading your potential for gains and losses.
Ways You Can Invest
Various approaches can be taken depending on the altcoin you want to invest in. You can invest during ICO for the cheapest coins or wait for the market launch to avoid risks. Look for coins hitting initial dips, potentially cheaper than ICO prices. Observe price patterns using chart indicators like the economic calendar. You can also earn interest through staking altcoins, by freezing them on a network. Alternatively, you can mine altcoins for regular dividends.
Types of Altcoins
Altcoins come in various types, aiming to serve different purposes:
- Stablecoins: Stablecoins like Tether’s USDT, MakerDAO’s DAI, and USD Coin (USDC) reduce volatility by pegging to a basket of goods like fiat currencies, precious metals, or other cryptos. The basket acts as a reserve for holders during failures or issues.
- Meme Coins: Inspired by jokes or humorously based on established cryptocurrencies, meme coins gain rapid popularity, often hyped online by influencers and investors for short-term gains. Notable among them is Dogecoin, based on the famous 2013 meme.
- Game Coins: These are new cryptocurrencies for in-game use in metaverse blockchain games. Traditional in-game purchases with fiat money are being replaced by blockchain-based games like The Sandbox, rewarding users with tasks to earn game-specific coins, e.g., MANA in Decentraland.
Choosing the ideal altcoin for investment depends on your financial situation, goals, risk tolerance, and prevailing market conditions. Consider the factors carefully to make informed investment decisions.