Altcoins emerged shortly after Bitcoin (BTC) and provided an alternative to more established cryptocurrencies. Currently, altcoins represent nearly 80% of the cryptocurrency market. Furthermore, there are currently more than 5,000 altcoins in circulation. On the contrary, investing in altcoins carries more risks than traditional cryptocurrencies such as Bitcoin and Ethereum (ETH).
Altcoins offer you the opportunity to earn high returns, especially when you know how to make more money from their existing altcoins. Users can find this as a quick guide for new investors in altcoins.
In this article, we will provide some little-known tips and things you should keep in mind before trading altcoins.
What Is Altcoins?
Before jumping into the tips and things to know while trading in altcoins, it is essential to understand what altcoins actually are.
Altcoins are cryptocurrencies other than Bitcoin (BTCUSD). They share characteristics with Bitcoin, but they also differ in other respects. For example, some altcoins use a different consensus mechanism to create blocks or verify transactions. Or, they differentiate themselves from Bitcoin by providing new or additional features such as smart contracts or lower price volatility.
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Things To Know While Trading Altcoins
Types Of Altcoins
Depending on their functionality and consensus mechanisms, altcoins are divided into several categories. Here is a summary of some of the most significant ones:
Mining Based
As the name suggests, mining-based altcoins are mined and exist. Most mining-based altcoins use PoW. It is a way to create new coins by solving difficult problems for the system to create blocks. Examples of mining-based altcoins include Litecoin, Monero, and ZCash.
Security Tokens
Security tokens are similar to securities traded on the stock market, except that they are of digital origin. Security tokens are similar to traditional stocks and often promise stock in the form of a dividend payment to the owner. The prospect of rising prices for such tokens is a great attraction for investors to put money into them.
Stablecoins
Since the launch, the trading and use of cryptocurrencies is characterized by volatility. Stablecoin aims to reduce this overall volatility by linking its value to a basket of commodities such as fiat currencies, precious metals, and other cryptocurrencies. The basket should serve as a reserve to redeem the owner in the event of a cryptocurrency bankruptcy or problem. Stablecoins’ fluctuations do not mean going beyond a narrow range.
Utility Tokens
Utility tokens are used to provide services within the network. For example, you can use it to purchase services, pay network fees, or take advantage of benefits. Unlike security tokens, tokens do not pay interest or participate in bets. Filecoin, which is used to buy storage space on the network, is an example of a utility token.
Meme Coins
As the name implies, meme coins are inspired by jokes and stupid versions of other well-known cryptocurrencies. They are usually popular in the short term and are often advertised online by prominent crypto influencers and private investors seeking to take advantage of short-term profits.
Where To Purchase Altcoins?
With the advent of multiple altcoins, the development of bitcoin exchange platforms has skyrocketed and has even increased market activity. However, most investors are still struggling to figure out where to buy small altcoins.
A “small cap” is a cryptocurrency with a market capitalization of less than $ 1 billion. A common rule of thumb when investing in cryptos is to classify them into groups based on market value. A large market capitalization indicates a safe investment, but this rule is not strict, and the user experience may vary.
Many platforms now allow traders to buy, hold, and sell altcoins. However, each of these platforms has different privacy policies and features. So, the best altcoin trade will depend on several factors, including buyer preferences.
However, many users have also suffered losses due to scams and exploited bugs on many exchanges. Therefore, it is up to every investor to trade on a reputable exchange.
Are Altcoins A Safe Investment?
The altcoin market is growing. This is an unequal couple. The number of altcoins listed on the cryptocurrency markets has grown exponentially over the past decade, attracting hordes of retail investors who bet on their price movements to make short-term profits. But these investors do not have the necessary capital to generate sufficient market liquidity.
