Bitcoin Or Altcoins: Where Should You Invest?

Bitcoin or altcoins? With the cryptocurrency market continuing to gain traction, this is a question on many investors' minds. Bitcoin is still the most popular cryptocurrency, but its 2009 introduction spawned a host of imitators, alternatives, and new technologies. These alternative coins, or altcoins, are designed to improve upon Bitcoin's functionality or add features that are not present in Bitcoin. While some altcoins have been endorsed as having newer features than Bitcoin, such as the ability to handle more transactions per second or use different consensus algorithms, Bitcoin has better investing fundamentals than most altcoins. It is the most purchased, held, and traded cryptocurrency on the market, with a market capitalization of about $1.2 trillion, or more than 60% of the total market cap of cryptocurrencies. However, altcoins offer a much higher upside in terms of percentage gain and can be a good investment if you believe in their long-term potential.

Is it better to invest in Bitcoin or Altcoins?

Altcoins are alternatives to Bitcoin, but they are riskier investments

Altcoins are alternative cryptocurrencies to Bitcoin and currently make up nearly 40% of the total cryptocurrency market. Developers create altcoins to improve the functionality of Bitcoin or add features that are not present in Bitcoin.

While some altcoins may have merit for investors, others advance purely on hype and speculation. Altcoins are incredibly risky investments and it is more likely that you will lose than win on an investment if you don't do adequate research.

Altcoins have a much higher upside in terms of percentage gain but also have a much higher risk. For example, Dogecoin took off in value in late January 2021 when people started buying it, causing the altcoin to go viral. Such investments can fall out of favour as quickly as they become popular.

Altcoins are also riskier than Bitcoin because they are less likely to withstand market crashes. Bitcoin has enough of a track record to show an ability to withstand market volatility.

If you are investing in altcoins, it is recommended that you only invest money you can afford to lose. It is also recommended that you invest in altcoins that you understand and believe in.

• It is difficult to know if an altcoin is a good investment.
• Altcoins are unregulated and are therefore not suitable for the typical retail investor.
• Your invested funds may quickly travel overseas without your knowledge.
• There are many players in the altcoin space, and it is nearly impossible to understand what is true and what the risks are.
• Even initial coin offerings that fall under the U.S. Securities and Exchange Commission's jurisdiction can still pose a significant risk of fraud.

Altcoins make up nearly 40% of the total cryptocurrency market

Bitcoin is the most dominant cryptocurrency in the market, with a market capitalization of about $1.2 trillion, or more than 55% of the total market cap of cryptocurrencies. However, altcoins, which make up nearly 40% of the total cryptocurrency market, are not to be overlooked. Altcoins are alternative cryptocurrencies to Bitcoin and are often presented as better alternatives to the premier cryptocurrency.

Differences Between Bitcoin and Altcoins

Bitcoin has better investing fundamentals than most altcoins. It is the most purchased, held, and traded cryptocurrency on the market, with a highly liquid asset base. Bitcoin also has enough of a track record to show an ability to withstand market crashes.

Altcoins, on the other hand, carry several unique risks that investors need to understand. They are incredibly risky investments, and it is more likely for investors to lose than win on an investment if adequate research is not done. Altcoins are also highly volatile, with their value rising and falling much more sharply than Bitcoin.

Investing in Altcoins

When Bitcoin goes up, altcoins tend to follow, and vice versa. However, the probability of choosing one of the few altcoins that will have staying power is low, given that there are more than 10,000 cryptocurrencies.

Crypto investors who want to diversify into altcoins should consider the high risks associated with these digital assets. It is recommended to seek out alternatives that are high in quality and have strong fundamentals. Risk-averse investors should look for altcoins with the promise of future widespread utility and consider the size of their market cap and the magnitude of price swings.

Popular Altcoins

While there are thousands of altcoins, some of the most popular include Ethereum, Cardano, Litecoin, Binance Coin, and Dogecoin.

Altcoins have a much higher upside in percentage gains but also a much higher risk

Altcoins: Higher Upside, Higher Risk

Altcoins are alternative cryptocurrencies to Bitcoin and often present themselves as better alternatives to the premier cryptocurrency. They make up nearly 40% of the total cryptocurrency market.

Altcoins can be thought of as variations of Bitcoin. Developers create them to improve the functionality or add features that are not present in Bitcoin.

While there are alternative coins that may have merit for investors, there are others that advance purely on hype and thrive on speculation.

Altcoins offer a much higher upside in percentage gains. For example, while Bitcoin was up more than 110% as of November 15, 2021, Ethereum, Bitcoin's top competitor, was up nearly 500% year-to-date, while the Shiba Inu Coin (SHIB) gained an astounding 380,000% in a year.

However, altcoins also carry a much higher risk. They are incredibly risky investments, and you may be more likely to lose than win on an investment if you don't do adequate research.

Altcoins are highly volatile. When Bitcoin goes up, altcoins also tend to go up, and when Bitcoin falls, altcoins tend to fall too. But the rises and falls of altcoins tend to be much more volatile than those of Bitcoin.

Altcoins are also less liquid than Bitcoin. Bitcoin has a market capitalization of about $1.2 trillion, or more than 60% of the total market cap of cryptocurrencies. Bitcoin's daily trading volume accounts for more than $30 billion.

Altcoins are also less established than Bitcoin and do not have the same track record of withstanding market crashes.

Additionally, there are more than 10,000 altcoins, and the probability of choosing one of the few that will have staying power is low.

Given these risks, it is essential to do your research before investing in altcoins. Understand the development team, technology, community, and use case of altcoins before making any investment decisions.

In summary, while altcoins offer a much higher upside in percentage gains, they also come with a much higher risk. Investors considering altcoins should carefully weigh the potential rewards against the significant risks involved.

Altcoins are incredibly risky investments. You are more likely to lose than win if you don't do adequate research

Investing in cryptocurrencies carries a certain allure, and altcoins are no exception. Altcoins are any cryptocurrencies that aren't Bitcoin (BTC) and are often presented as better alternatives to the premier cryptocurrency. However, it's important to approach altcoins with caution as they are incredibly risky investments.

Altcoins are highly volatile and prone to sudden surges in popularity, such as Dogecoin, which took off in value in late January 2021 when people started buying it, causing the altcoin to go viral. But these investments can fall out of favour just as quickly as they rise.

Ben Weiss, COO of CoinFlip, warns that with over 5,000 altcoins on the market, most will never materialise into anything useful or provide substantial long-term returns. While some altcoins, like Ether and Chainlink, facilitate new and exciting advances in blockchain technology, the majority are unlikely to catch up with Bitcoin.

Before investing in altcoins, it's crucial to understand the risks and do adequate research. Here are some questions to consider:

• Who is issuing and sponsoring the altcoin? What is their background, and how will they make money from the transaction?
• Where is your money going and what will it be used for?
• How and when can you sell your investment, and what will it cost?
• What specific rights are you entitled to with this investment?
• Are there financial statements available, and are they audited?
• What legal protections are in place in the event of fraud, a hack, or malware?
• Who is responsible for refunding your money if something goes wrong, and will there be adequate funds to do so?

Remember, no one can be an expert at investing in altcoins as they are new and constantly evolving. It's best to only invest in an altcoin that you truly understand and believe in. As with any investment, only invest money you can afford to lose.

If you're looking for a safer investment but still want exposure to altcoins, consider starting with the top five or ten coins by market capitalisation, such as Ethereum or Litecoin. These coins have stronger fundamentals and are less vulnerable to market manipulation and hacks.

Additionally, it's important to stay updated on market trends and regulatory changes in the ever-evolving cryptocurrency landscape. Regulatory policies can significantly impact the development and growth of altcoins.

In summary, while altcoins offer the potential for high upside gains, they also come with a much higher risk. Thorough research and due diligence are essential before investing in this volatile asset class.

Altcoins offer diversification and potentially higher returns

Altcoins are any cryptocurrencies that aren't Bitcoin (BTC). They are alternatives to Bitcoin and often present themselves as better options than the premier cryptocurrency. Altcoins make up nearly 40% of the total cryptocurrency market.

While Bitcoin is still the most dominant cryptocurrency, accounting for a majority of all cryptocurrencies' market capitalization, altcoins have surged in recent years. For instance, Ethereum (ETH), Bitcoin's top competitor, was up nearly 500% year-to-date in November 2021. Similarly, the Shiba Inu Coin (SHIB) gained an astounding 380,000% in a year.

Such numbers highlight the potential for higher returns from altcoins compared to Bitcoin. However, it's important to note that altcoins are incredibly risky investments. They are highly volatile and prone to market manipulation and hacks.

When considering investing in altcoins, it's crucial to understand the risks and do thorough research. Ben Weiss, Chief Operating Officer of CoinFlip, advises investors to understand who is behind the coin and its value proposition. He also suggests starting with the top five or ten coins by market capitalization, such as Ethereum or Litecoin, for safer investments.

Additionally, investors should be wary of making investment decisions based on hype or fear of missing out (FOMO). Instead, it's essential to conduct thorough research and due diligence on a project's fundamentals, market position, and team.

• Understand the development team, technology, community, and use case.
• Stay updated on market trends and regulatory changes in the cryptocurrency landscape.
• Evaluate the growth potential, unique features, and innovative technology of the altcoin.
• Assess the competition in the market and how it may impact the altcoin's performance.
• Consider the economic conditions and whether investors are seeking alternatives during economic uncertainty.

By diversifying your portfolio with carefully selected altcoins, you can potentially achieve higher returns while managing the risks associated with this volatile asset class.

Frequently asked questions