What are altcoins?
When you think of crypto, Bitcoin is probably the first thing that comes to mind. But did you know that besides Bitcoin, there are more than 10,000 other cryptocurrencies? We call these altcoins. Where Bitcoin is focused on improving the payment system, altcoins solve many other social and business problems.
If you dive into the wonderful world of crypto, you will soon come across the term altcoins. Because Bitcoin is seen as the founder of cryptocurrencies, all other cryptocurrencies are the alternatives. In other words, every cryptocurrency except Bitcoin is an altcoin. This stands for alternative coins; or Bitcoin alternative.
Bitcoin was the first coin to hit the market and all cryptos that followed are alternatives to Bitcoin. Altcoins, if you look at it this way, mainly aim to be a better alternative to Bitcoin. They do this by, for example, having a faster processing time, lower energy consumption or lower costs. For most cryptocurrencies, it applies that they are not just a copy of Bitcoin under a different name.
Some cryptocurrencies are derived from the Bitcoin blockchain. But most have their own blockchain and protocol. The best known are Ethereum and XRP. These altcoins, like Bitcoin, have all the properties to serve as a currency and are designed to make payments. It took a while after the launch of Bitcoin before people realized the possibilities of the new currency and the Blockchain technology. Because Bitcoin is open source, parties that wanted to create a new cryptocurrency did not have to reinvent the wheel. As a result, various altcoins have ensured that the scripts and technology of the blockchain improved.
Directly compare different altcoin providers or read more about the properties of altcoins. You will also learn how to determine which altcoins are best to buy.
What is the difference between Bitcoin and altcoins?
The difference with Bitcoin is that one crypto, Bitcoin, is the basis of all others. But Bitcoin is considered the founder. That is the most important difference. Over time, the differences in the underlying technology became greater. Nowadays, not all altcoins are intended to function as cryptocurrencies. For example, there are the popular NFT tokens that function as a unique certificate of ownership. But there are also many DEFI (decentralized finance) related altcoins. Almost every coin tries to solve a social or business problem with its underlying technology. Although there will always be enough coins circulating that offer little added value.
Why invest in altcoins?
The high price of Bitcoin sometimes scares off newcomers to the market. Although you don’t have to buy a whole bitcoin, this is often a reason why people start looking at altcoins. People see the various altcoins mainly as a cheaper alternative with more growth potential. Especially beginners are interested because of this.
Low market cap
The success of your investment in cryptocurrencies simply depends on the price development of the coin in which you have invested. The potential increase in the price, and the demand required from the market for this, depends on the market cap of the coin. The market cap of a coin represents the total value of all coins or tokens that are currently in circulation. In other words, current price x number of coins in circulation. The lower the market cap, the less money will be needed from the market to increase the price. The individual market cap of an altcoin is generally only a fraction of the market cap of Bitcoin. As a result, the potential profits are considerably greater and the amount that must be invested for this is lower. This is what makes investing in altcoins so attractive, especially for beginners. More risk, but higher potential profits.
Just imagine what it would have been like if you had invested in Bitcoin when it was only worth $0.05. In theory, this could happen with any cryptocurrency.
Mining altcoins
Unlike Bitcoin, altcoins are still relatively easy to mine. Transactions on the blockchain are approved by computers. They receive a reward for this. This process is called mining. Bitcoin mining has not been possible for the average person for a long time. The costs of the equipment and energy ensure that it is no longer profitable to mine bitcoins with one computer. However, with many altcoins this is still feasible. Even with a simple household computer.
Which altcoins to buy?
Of course you are wondering which altcoins you can best buy now. You can answer that question for yourself from technical or fundamental analysis. With technical analysis you map out important price levels, which are interesting to buy. Think of support levels and demand zones. But mapping bullish price patterns also helps with this. What you can best buy is therefore determined by price development. With fundamental analysis you mainly look at macroeconomic conditions. Around which type of crypto do you expect to see a future hype? Think of the hype around DEFI and Metaverse altcoins, which we saw in 2021.
Altcoins price
It is important to closely follow the current price of different altcoins. This way you ensure that you know in time when to buy or sell altcoins. It is good to know that the development of the Ethereum price is often of great importance for the direction that altcoins go. This is due to the high market cap of Ethereum. The price of most altcoins usually follows the price of “the big” Ethereum. A similar relationship can be observed between the price of Bitcoin and the price of Ethereum.
Altcoin season
A frequently heard term is altcoin season. This stands for a period in which altcoins perform much better than Bitcoin. You can see this in the decrease in Bitcoin dominance. That does not mean that Bitcoin is falling during this period. The price of Bitcoin often rises, but the prices of altcoins rise much faster. It is this period in which the most bizarre positive returns on crypto can usually be achieved.
In 2021 we saw an altcoin season that was accompanied by the enormous hype surrounding NFT tokens. In 2020 we saw the popularity of DEFI tokens increase sharply, which ultimately led to an altcoin season. The increase in interest in a certain type of altcoin can therefore be seen as a signal that a new altcoin season is coming.
Which altcoin to buy in 2022?
We give you some tips to determine which altcoins you can best buy this year.
- Determine the right time to shift your positions from Bitcoin to altcoins. Look at the development of bitcoin dominance.
- Research emerging trends and innovations in the market. What will be the next metaverse hype? Choose coins that are related to this new emerging hype.
- Do not buy when the hype in the market is already going on. Often you are too late and your altcoins will be loss-making.
