In 2021 when older coins like Bitcoin and Ether had lost their significance compared to newer coins with more security and higher returns, a new breed came into the market called Altcoin cryptocurrencies.
One of the leading research firms says that Bitcoin has significantly lost its value during the previous year. It was more of an altcoin season for the last four quarters.
If you think that Altcoin is the name of a cryptocurrency, it’s wrong. Instead, the term “altcoin” describes any cryptocurrency alternative to Bitcoin.
For instance, Ripple, Litecoin, and Ethereum are technical “altcoins.” Some people also call this type of cryptocurrency lower market capitalizations with that in mind.
On the flip side, “major alt” if we mean coins with the top market caps that aren’t Bitcoin, and we say “minor alternative” to describe all other cryptos.
What is Altcoin?
Altcoin cryptocurrency coins are a shorthand for “alternative coins,” which means cryptocurrencies other than Bitcoin. After Bitcoin, these are the top nine cryptocurrencies:
- USD Coin
Types of Altcoin cryptocurrencies
Investors should know a few things before investing in altcoins, as most people may not know that there are different types of altcoins in the market. With that in mind, here is the list of different altcoins.
Stablecoins: These coins are tied to a fiat currency, commodity, or other cryptocurrencies. Unlike Bitcoin, Stablecoin experiences less volatility but grows much slower.
Miner coins: Miners get these coins after solving complex problems and provide proof of work, known as the blockchain. This coin has recently become harder to mine as time goes on and supply increases.
Security tokens: These tokens entered the market through ICOs. Moreover, they trade like securities and serve as digital equity in something. Regardless, holders also avail themselves of dividend or voting rights.
Utility tokens: These tokens require a good network for a specific purpose. For instance, you might redeem utility tokens to disburse for server time or to use the software.
How are altcoins different from bitcoin?
Although the framework for Altcoins and Bitcoin is similar. However, there are differences between bitcoin and Altcoin, as Bitcoin is the primary form of cryptocurrency.
Furthermore, bitcoin has its drawbacks, like its proof of work (PoW) mechanism used for developing blocks, which eats a lot of energy and time. Its intelligent contract abilities are also limited.
On the other side, Altcoin works on Bitcoins’s flaws and shows competitive benefits for investors. It happens using the proof of stake (PoS) mechanism to minimize energy consumption and time for creating blocks and validating new transactions.
Should you consider altcoins as an investment option?
Specialists warn that Bitcoin is highly volatile. However, altcoins are even more so.
Ethereum, the most widely-known altcoin, has grown significantly since its establishment. Thanks to its innovative contract capabilities, that increased its popularity of digitally scarce art known as non-fungible tokens (NFTs). Ethereum has already crossed a market cap of more than $250 billion by the time we are writing this blog.
However, don’t let the popularity of altcoins result in fear-of-missing-out (FOMO). On the contrary, even crypto preachers view the rise of cryptocurrency with some healthy skepticism.
Hence, some speculative investors with a high-risk tolerance attempt to time the altcoin market and get in while low prices. Experts even advise investors to keep their crypto holding under 5% of their entire portfolio and stick with the two most well-established coins – Bitcoin and Ethereum.
And that is only if you have already built an emergency fund and know crypto investments will not sink all your long-term objectives.
The benefit of investing in Altcoins cryptocurrencies
If you have made your plan to invest in Altcoins, it could be a great opportunity. Why? Volatility is a concern in crypto markets.
Altcoins benefit from tremendous investor sentiment – meaning everyone’s waiting for the next Bitcoin. As a result, even smaller micro-cap coins have a chance to gain incredible momentum and grow.
An altcoin is also significant because they are typically not influenced by peripheral markets. As a result, they are a great hedge against traditional markets, like the stock market or the forex market.
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