Altcoin Investment Strategies: A Beginner's Guide To Crypto Profits

Investing in altcoins can be a risky but rewarding endeavour. Altcoins are any cryptocurrency other than Bitcoin, and there are thousands to choose from.

Before investing, it's important to research the crypto projects you're considering. This includes visiting the project website, reading the white paper, and seeking additional information. Once you've found an altcoin that fits your investment goals, the next step is to choose a crypto exchange that offers that altcoin, open an account, and deposit funds for trading.

Some popular altcoins include Ethereum, Litecoin, Dogecoin, and Cardano. These altcoins offer various features and functionalities that set them apart from Bitcoin, such as smart contract capabilities, faster transactions, or a focus on privacy.

It's worth noting that the crypto market is highly volatile and risky, with many scams and failed projects. Therefore, it's crucial to do your own research and only invest what you're willing to lose.

Researching Altcoins

• Understand the core reasons for investing in a particular altcoin. Identify the problem it is trying to solve and assess the size of the problem. Evaluate previous attempts to solve the issue and learn from their successes and failures.
• Analyse the altcoin's structure and governance. Determine if it is centralised or decentralised and the implications of each. Assess the reputation and expertise of the development team, their accessibility, and public presence on platforms like Twitter.
• Evaluate the altcoin's marketing and branding strategies. Examine the marketing stance, sophistication, branding adaptation, and any re-branding efforts. Positive mentions in crypto-media outlets and mainstream media can add credibility.
• Study the altcoin's social proof and community engagement. Consider the number of investors/users, Twitter followers, activity on relevant hashtags, website visits, and engagement on platforms like Slack and Reddit.
• Assess the altcoin's technical capacity and unique features. Understand the new technology being developed and how it improves the solution. Evaluate the potential for copying the solution and the overall functionality of the coin.
• Analyse the price, market, and exchanges related to the altcoin. Look for patterns in price fluctuations and their connection to actual value-adding events. Identify which exchanges accept the altcoin and whether it is being used by true users or speculators.
• Consider the economics and supply-side of the altcoin. Determine the inflation or deflation rate, the total currency generation over time, and the distribution model. Scrutinise the behaviour and intentions of the coin founders, who act as the "FED" of that specific coin.
• Evaluate the regulatory environment and potential risks associated with the altcoin. Assess whether it focuses on a controversial market or region, allows anonymous transactions, is popular on the dark web, or has been classified as a scam coin.
• Stay informed about crypto news and updates through platforms like Twitter, Reddit, Coin Market Cap, Coin Desk, and Telegram. Utilise forums like bitcointalk.org and platform-specific forums like forum.ethereum.org for in-depth discussions.
• Utilise quantitative metrics websites like www.altcoinanalytics.com and www.tellawallet.com to analyse factors such as social media mentions, sentiment analysis, risk, traded volumes, and news analysis.

Remember to do your own due diligence and think independently when researching and investing in altcoins.

Choosing an Exchange

• Reputation and Security: The reputation and security of an exchange are crucial. Look for exchanges that have been in the industry for a while and have a good track record, such as Coinbase, Binance, or Kraken. These exchanges have strong security measures in place and are trusted by millions of users.
• Range of Altcoins: Consider the variety of altcoins available on the exchange. Some exchanges offer a wider range of altcoins than others. For example, Binance supports hundreds of altcoins, while Gemini only lists Ethereum as its altcoin option. Choose an exchange that offers the altcoins you are interested in trading.
• Fees: Deposit, trading, and withdrawal fees can impact your profits. Research the fee structure of each exchange before deciding. Some exchanges offer low trading fees, such as Crypto.com, while others may have higher fees but provide additional features.
• Ease of Use: Choose an exchange with a user-friendly interface, especially if you are a beginner. Coinbase, for instance, is known for its user-friendly platform, making it a popular choice for first-time crypto investors.
• Payment Methods: Consider the payment methods accepted by the exchange. Some exchanges allow you to use credit or debit cards, bank transfers, or other digital payment methods. Ensure the exchange you choose supports your preferred payment method.
• Customer Support: Look for an exchange with responsive and helpful customer support. This is important, especially if you are new to crypto trading and may need assistance along the way.
• Regulation and Compliance: Choose an exchange that complies with regulatory requirements and knows Your Customer (KYC) guidelines. This adds an extra layer of security and helps protect your investment.
• Geographic Availability: Some exchanges are available globally, while others may have restrictions in certain countries. Make sure the exchange you choose is accessible in your region.

Remember to do your research and compare multiple exchanges before making your decision. Read reviews, check for transparency in their operations, and ensure your chosen exchange has a good reputation in the crypto community.

Fiat to Digital

As most altcoins can't be purchased with fiat money, you'll need to first buy some Bitcoin (BTC) or Ethereum (ETH).

You can do this by signing up to a crypto exchange such as MEXC, Coinbase, Binance, or Crypto.com. You'll then need to complete identity verification and set up a payment method.

Once you've done this, you can buy BTC or ETH with a credit or debit card, or via a bank transfer.

Now that you have BTC or ETH, you can trade this for your chosen altcoin. To do this, you'll need to find an exchange that supports your chosen altcoin and has your desired currency pair.

After purchasing your altcoin, it's recommended that you move your coins into a wallet for safekeeping. There are two types of wallets: hot wallets and cold wallets. Hot wallets are connected to the internet and include mobile and desktop wallets. Cold wallets, on the other hand, are offline and include hardware wallets.

Selecting an Altcoin

When selecting an altcoin to invest in, it's important to remember that not all altcoins are good for investment purposes. Some may be useless or even fraudulent. There are, however, some key considerations and steps you can take to make an informed decision.

Firstly, it's important to understand what an altcoin is and how it differs from Bitcoin. Altcoins are any cryptocurrencies other than Bitcoin. They are typically created to achieve specific goals within their blockchain community, such as transactional and payment purposes or raising donations for philanthropic causes.

When selecting an altcoin, it's crucial to conduct thorough research. Here are some key steps and factors to consider:

• Read the project's whitepaper: This will help you understand the cryptocurrency's goals, technology, and use cases. It will also give you insight into the team behind the project.
• Analyse demand and supply: Look for altcoins with increasing demand and stable or decreasing supply. This can indicate potential price increases.
• Assess the team and stakeholders: Evaluate the credentials, experience, and reputation of the team members and stakeholders.
• Evaluate the crypto community: A strong and active community can indicate support and potential growth.
• Understand the blockchain technology and consensus algorithm: Look into the type of blockchain and consensus algorithm used by the altcoin. This will help you identify new technologies that can add value.
• Check the coin's price history: Analyse the coin's price fluctuations and patterns to make more informed predictions.
• Consider the exchange: Choose a reputable and popular exchange with high liquidity. Also, consider the fees and security measures.
• Research the wallet: Ensure the altcoin is supported by your preferred wallet or choose a new wallet that suits your needs.

Additionally, you can refer to a checklist of criteria to evaluate potential altcoins, including circulating supply, network value, exchange listings, volatility, and social media engagement.

Remember, investing in altcoins carries risks, and it's important to conduct your own research and only invest what you can afford to lose.

Storing Altcoins

When it comes to storing your altcoins, or any cryptocurrency, safety and security are paramount. The best way to keep your altcoins safe is to use a cryptocurrency wallet. Wallets can be located online, on your PC, or as a piece of dedicated hardware. A wallet is a combination of an address and a private key, which allows you to make transactions from that address. It's important to note that you don't actually store your coins anywhere, they remain on the blockchain, and your wallet controls the address.

There are several types of wallets to choose from, each with its own advantages and disadvantages:

• Hardware wallets: These are considered the safest way to store your altcoins. Hardware wallets are offline or cold storage devices that are not connected to the internet. Examples include Ledger Nano, Ledger Blue, and Trezor. They are usually USB devices that you can connect to your computer. They offer more security than other types of wallets because even if someone takes over your PC, they won't be able to access your wallet without the physical device. Additionally, many hardware wallets require you to physically press a button on the device to confirm a transaction, adding an extra layer of security.
• Desktop wallets: For desktop storage, Coinbase is often recommended as the number one option. With Coinbase, you can create an account, buy altcoins on their exchange, or transfer your existing tokens. It is important to activate all the security features available, such as two-factor authentication (2FA), to protect your coins from hackers. However, even with security measures in place, your computer is still vulnerable to hacks, and if someone gains access to your PC, they can access your wallet.
• Mobile wallets: Mobile apps such as Coinbase and Cool Wallet offer convenience and the ability to manage your funds on the go. While they may not have the same level of security as hardware wallets, they often have security features like facial ID or fingerprint recognition. Additionally, with mobile wallets, you sacrifice some security for convenience, as it is easier to move your cryptocurrencies.
• Exchange wallets: While exchange wallets can be a good option, it is important to remember that you are dependent on a third party to store your coins. Exchanges can fail or block wallets and accounts, resulting in the loss of your tokens. It is recommended to only hold your tokens at an exchange if you are actively trading.

When deciding how to store your altcoins, it is essential to consider your priorities. Do you want the added security of a hardware wallet, or is convenience and ease of access more important to you? Additionally, it is worth remembering that no matter which storage method you choose, there are always risks involved when storing altcoins.

Frequently asked questions