Cryptocurrency was launched in the year 2009, and it quickly became the point of discussion in the financial market.
Bitcoin (BTC) became the face of cryptocurrency and dominated it up to the extent that any other digital currency was considered an altcoin.
Altcoins are cryptocurrencies beyond Bitcoin.
Today, there are thousands of altcoins available in the crypto market that provide you with the opportunity to enter cryptocurrency if you cannot afford a single Bitcoin.
But there are certain things about altcoins which you should be aware of when investing in them.
Let us explore altcoins in detail and the things you should know before investing in them.
An altcoin can be defined as a cryptocurrency other than Bitcoin.
According to an estimation, over 10,000 cryptocurrencies are available in which you can invest.
Some of the most popular altcoins today are Ethereum, Binance Coin, Tether, and more.
Like Bitcoin, altcoins exist on blockchain technology where each transaction is recorded on a public distributed ledger.
To minimize the risk of fraud, altcoins are protected by cryptography which consists of complex mathematical problems.
You can buy an altcoin through a crypto exchange platform and store them either in an online wallet or an offline wallet.
Carl Runefelt, alias, The Moon, is a global crypto leader who has invested in more than 350 crypto startups and is pushing for the mass adoption of cryptocurrency.
He says, “I had gotten some nice profits from my Ethereum holdings for a long time. I have been holding Ethereum for multiple years.”
Types of Altcoins
Altcoins can be divided into multiple categories based on their technical capacity.
Bitcoin is the first-generation cryptocurrency and altcoins include second- and third-generation cryptocurrencies and beyond.
When you are buying an altcoin, you should pay attention to the type and technical ability of the coin.
Altcoins can be divided into the following types.
Cryptocurrency is often labelled as volatile which means that its value can fluctuate at any time.
To minimize the risk of crypto volatility, some cryptocurrencies are pegged to that of another asset such as the U.S. dollar.
These cryptocurrencies are called stablecoins which are a type of altcoins.
Some of the popular stablecoins include USD Coin and Tether
Another type of altcoin is called mining-based coins.
These altcoins are mined into circulation by computers to solve the complex mathematical problem.
These coins require a lot of energy to work.
The world’s largest cryptocurrency by market capitalization – Bitcoin – is a mining-based coin.
Security tokens or security coins are altcoins that represent a fractional interest in another asset.
You can own a fraction of an asset through security tokens.
For example, your ownership of a piece of art can be validated by a security token.
This allows traditional assets to be more securitized.
What to Consider Before Buying an Altcoin?
When you have decided to buy altcoins, you should be careful of the changing market patterns and invest wisely.
Carl on his YouTube channel, The Moon, says, “Sell coins when they hit the top value and purchase another coin, take your profits, and buy other coins as cryptocurrencies are highly volatile. This applies to everything, whether it is Bitcoin or any other coin.”
Here are some important things that you should consider before buying altcoins.
First things first!
When you are buying a cryptocurrency, you should first do market research as this would help you find the right crypto to buy.
There are many cryptocurrencies available to invest and market sentiments play a significant role in driving their value.
Sometimes, crypto investors create hype around a particular cryptocurrency that might fade away with time.
Instead, you should study the current trading charts of an altcoin in which you want to invest.
Focus on Technical Capacity
The technical capacity of an altcoin plays a significant role in its functionality.
Whenever you are buying an altcoin, study its technical capacity.
For example, some altcoins like Solana provide high functionality at a low cost.
Lastly, invest wisely in cryptocurrency.
Some people suffer huge losses in crypto because they invest all the money they have.
It is recommended by crypto experts that a person should invest in a cryptocurrency up to which he can easily afford to lose.
You should always have some money in the backup since cryptocurrency is extremely volatile.
Altcoins are getting popular with time since Bitcoin is becoming unaffordable for many.
As the cryptocurrency pie continues to expand, the share of altcoins in the crypto market is significant.
The above-mentioned tips would help you choose the right type of altcoin in which you want to invest.