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It’s no doubt that Bitcoin(BTC) dominates the cryptocurrency market, but there are many other competing digital cryptocurrencies called ‘alternative coins’ or ‘altcoins’. With these alternative coins, crypto investors may need a clear idea of how each of these altcoins differs from Bitcoin and what they can offer in a portfolio.
Just as Bitcoin has been rallying this year, up more than 110% as of March 30, many altcoins have had meteoric rises. Ethereum(ETH), Bitcoin’s top competitor, is up nearly 500% year-to-date while Shiba Inu coin(SHIB) has gained an amazing 380000% in a year.
These numbers could entice traders to invest in altcoins, but altcoins carry several unique risks investors need to understand.
Here’s what you need to understand when comparing digital assets in the crypto market:
- What are Altcoins?
- Difference between Bitcoin and Altcoin
- Investing in Altcoin
What are Altcoins?
Altcoins are alternative cryptocurrencies to Bitcoin. But altcoins use Bitcoin as a benchmark since it’s the first crypto coin in the crypto market. The first thing that comes to your mind when the word ‘cryptocurrency’ is heard is probably ‘Bitcoin’ and this is because Bitcoin has dominated the crypto market – which is indeed deserving. Bitcoin accounts for the majority of all crypto market capitalization of over one trillion dollars.
Colin Page, founder of Presearch said,
” As the first-ever cryptocurrency, Bitcoin has set a model of how cryptocurrency projects should operate.”
Both Bitcoin and altcoin use blockchain technology with similar features, though they can vary in purposes. Bitcoin can be said to be the main cryptocurrency, making altcoin an alternative.
There are over 15,000 altcoins available in the crypto market but some of the popular are:
- Ethereum (ETH)
- Litecoin (LTC)
- Solana (SOL)
- Shiba Inu coin (SHIB)
- Dogecoin (DOGE)
- Cardano (ADA)
- Ripple (XRP)
Difference Between Bitcoin and Altcoins
According to altcoin developers, the main reason why alternative coins were created is to build different versions of Bitcoin and add certain features they believe were missing from Bitcoin’s platform.
Ethereum is a technology that enables users to send and receive cryptocurrency, but another purpose of Ethereum is to be used as a tool in application development where new tokens can be built, as seen with nonfungible tokens (NFTs).
Similar to Ethereum, Cardano offers peer-to-peer transactions and allows creators to build applications on the network. Cardano also takes a research-intensive approach to building out its blockchain network.
Litecoin in its similar features has a larger supply than Bitcoin and Litecoin transactions are five times faster than Bitcoin’s.
It is fair to say that Bitcoin has better investing fundamentals than altcoins. Bitcoin is the most purchased, held, and traded cryptocurrency in the market. Due to its demand, Bitcoin continues to grow – making it a better option for traders. Many altcoins were developed for experiment purposes, to add or correct those which were believed to be unavailable or inaccurate in Bitcoin. Though, some altcoins like Ethereum have strong fundamentals.
Investing in Altcoin
Investing in altcoins can be critical. When Bitcoin price rises, altcoins also tend to go up, and when Bitcoins falls, altcoin also falls. Altcoins tend to be much more volatile than Bitcoin.
Many crypto traders are skeptical about how to invest in altcoins because they are not sure of profitable returns, unlike Bitcoin. Bitcoin tends to be more profitable even at the worst moments, many investors are ready to buy Bitcoin without the fear of losing their money. Meanwhile, the fear of losing strikes when it comes to investing in an altcoin.
Some altcoins can carry high risks. It’s best to do your proper research and pick out the best options for yourself.