Cryptocurrencies are revolutionizing the use of money.
Today, cryptocurrency is the buzzword in the financial market as more people are investing in it than ever.
But if you have only heard about Bitcoin (BTC) when it comes to cryptocurrency, you might not be the only one.
According to crypto experts, more than 10,000 cryptocurrencies are available to invest in.
Cryptocurrencies beyond BTC are called altcoins.
This has happened because Bitcoin has gained so much popularity that other cryptocurrencies are known as alternative coins or altcoins.
Let us explore altcoins and find out what you should know about them.
What are Altcoins?
As it has already been mentioned that cryptocurrencies other than Bitcoin are called altcoins.
But there are some important things about altcoins that you should be aware of.
For example, the technical ability of an altcoin plays a significant role in determining its value.
Altcoins exist on blockchain technology that is protected by cryptography.
The transactions of altcoins are recorded on a public distributed ledger to ensure enhanced transparency.
Like Bitcoin, altcoins are free from the influence of banks or government regulations since these are decentralized cryptocurrencies.
Carl Runefelt, alias, The Moon, is a global crypto leader who has invested in more than 350 crypto startups.
He says, “We have seen altcoins rally very, very strongly in the last few months. I think we will continue to see that. I think the likely scenario is that we will continue to see altcoins rise before Bitcoin peaks.”
Altcoins can be divided into different types based on their technical capacity and this is something you should know before buying them.
Types of Altcoins
Altcoins can be defined as second-generation or third-generation cryptocurrencies which vary according to their specifications.
The protocols of altcoins have been modified with time to ensure the best performance.
But before investing in altcoins, you should study their technical capacities.
The most popular categories of altcoins are the following.
A mining-based altcoin is a cryptocurrency that has been mined to solve complex mathematical problems.
In addition, they verify crypto transactions and increase the supply of coins.
Bitcoin is also a mining-based coin as its prominent role is to process crypto transactions.
One problem with mining-based coins is that they require significant energy to process.
Cryptocurrency is labelled as volatile which means that its value can fluctuate at any time.
To reduce crypto volatility, some altcoins have been pegged against other assets such as the U.S. dollar, known as stablecoins.
The price fluctuations of stablecoins are adjusted according to the asset they follow.
But stablecoins are mostly chosen by people for savings or to send money and not for investment.
Another popular type of altcoin is the governance coin.
The governance coins are designed to give holders possession of an asset.
For example, with a governance coin, you can have the voting right to shape the future of a project.
These coins work in a decentralized way and help all holders to have a say.
The crypto market has thousands of altcoins from which you can select the coin of your choice to buy.
Listed below are some of the largest altcoins according to market capitalization.
- Ethereum (ETH)
- Tether (USDT)
- Binance Coin (BNB)
- USD Coin
- Binance USD
But you should remember that these coins can fluctuate in ranking based on their value.
Things to Consider Before Buying Altcoins
Cryptocurrency is relatively a new type of currency as compared to fiat or traditional currency.
You might be aware of the working of fiat, but cryptocurrency demands a comprehensive understanding before you start investing.
Carl on his YouTube channel, The Moon, says, “I stick to altcoin projects that I believe in and are backed by strong projects.”
Investment in altcoins can be successful when you build your knowledge about them and understand how they work.
Here are some important things that you should do before investing in altcoins.
- The crypto market is driven entirely by sentiments, and you should avoid them when buying cryptocurrency.
- You should invest in cryptocurrency after doing rigorous market research.
- Examine the current trade charts of a cryptocurrency you want to buy.
- Always invest in a cryptocurrency that you can easily afford to lose.
- Mostly, investors create hype around a particular coin that you should avoid.
- When buying an altcoin, focus on its technical capacity and choose the one that fits your motives.
Cryptocurrency has withstood the test of time and Bitcoin has emerged as the world’s largest coin by market capitalization.
In addition, if you cannot own a single BTC, you have a remarkable opportunity to invest in altcoins.
Some altcoins such as Ethereum have grown in value with time.
The above-mentioned tips will help you choose the right type of altcoin and secure your cryptocurrency investment.