We've all heard of investing in Bitcoin, and altcoins are other types of cryptocurrency that aim to improve on Bitcoin's faults.
Let's get to the following commonly asked questions:
If you're wondering whether to invest in Bitcoin vs. altcoins, keep reading to understand what altcoins are and how to begin trading them.
Altcoins are any cryptocurrencies other than Bitcoin. Based on Bitcoin mining, they use blockchain networks for secure buying and selling. Bitcoins and altcoins are decentralised exchanges, meaning that transactions are peer-to-peer. Cryptocurrencies are tradable, like the stock market, not non-fungible tokens (NFTs), although they are digital assets.
Altcoins aim to create cryptocurrency improvements. For example, new tech to change the world of finance, for, e.g. DeFi (staking, rewards, P2P lending, etc.) and NFTs (a new metaverse for digital collectible items).
As with all cryptocurrencies, altcoins are volatile unregulated investments and are much riskier investments when compared to BTC and Ether. Generally speaking, 99% of altcoins are pure speculative plays.
Important: Not all altcoins survive. There are some "dead" cryptocurrencies where investors lost all of their money. Whilst some coins were dead and have since been resurrected — these coins are referred to as “Zombie coins.”
The top five centralised cryptocurrency exchanges in Australia are:
Important: Research different exchange platforms to see which is the best fit for you. Be sure to investigate things like exchange downtime (I.e. does it often crash during pumps/dumps), cybersecurity (I.e. has it been hacked and how secure is it), features (I.e. leverage trading), etc. You can also trade cryptocurrency on decentralized exchanges too — but just be aware that these do carry a lot more risk, due to their decentralized nature.
Altcoin season, or alt season, is the time in the cryptocurrency markets when altcoins outperform Bitcoin in terms of percentage gains against their Bitcoin value.
Note: You can track the Bitcoin Dominance chart on TradingView to identify when altcoins will break out.
As altcoins are a digital currency that is primarily based on Bitcoins, their price prediction often follows a similar trajectory as Bitcoin.
We know from previous market data that when Bitcoin falls in value (a bear market), most altcoins will drop 80-90% of their value. When altcoins enter the bear market, most investors in the crypto market will want to sell into a stablecoin.
Altcoin seasons typically come and go in waves. During a Bitcoin bull run (I.e. After a Bitcoin halving takes place) altcoins will:
There will also be other mini waves and trends too, for example:
You can also track Bitcoin’s on-chain analysis via data analytics software firms like Glassnode and Coinmetrics that will give you an indication of when whales, institutions, and long-term holders are buying and selling. On-chain data is especially useful for retail investors and crypto traders alike as it allows them to gain a sense as to what the big money is doing.
LunarCrush is another one that you should definitely check out, because it provides social intelligence on the overall crypto market and tracks things like “social sentiment.”
Plus, make sure to use other data trends too, like:
Note: Many crypto investors will use dollar-cost averaging (DCA) as a strategy to increase their crypto portfolio to accumulate more assets.
There will only be 21 million Bitcoins in existence. The number of Bitcoin earning rewards halves every four years, and this is known as the "Bitcoin halving," or "halvening."
When Bitcoins were first introduced to the world — every ten minutes, 50 Bitcoins would enter circulation.
The fourth Bitcoin halving is expected to take place some time during 2024, and analysts expect that in 2025, Bitcoin could be valued between US$500,000-$1,000,000 based on the stock to flow model by PlanB.
Each Bitcoin halving cycle, the scarcity of Bitcoin increases and with the Bitcoin mining rewards getting cut in half, this induces a "supply shock" that sees Bitcoin print all-time-highs (ATH).
History tells us so far that if you have held Bitcoin for longer than 5 years you will always be in a massive profit. And, due to Bitcoin’s characteristics (scarcity, portability, divisibility, etc) — many investors today call Bitcoin “Gold 2.0,” and treat it as an inflationary investment hedge.
Altcoins fall into different categories, such as mining, stablecoins, meme coins, utility tokens, DeFi, non-fungible tokens (NFTs), and much more. Here we’re going to cover the basics.
Coins come into existence through mining, which uses Proof of Work and blockchain technology, and miners solve challenging problems and are rewarded with crypto assets.
Stablecoins attach their value to tangible goods (Eg. pegged to the U.S. dollar; or pegged to the Australian dollar). Examples include Tether (USDT), Maker DAO, and Binance USD (BUSD).
Security tokens are most similar to traditional stocks, except digital, and investors receive equity or a dividend payout. Security tokens often take the form of initial coin offerings (ICOs).
Meme coins derive from joke cryptocurrencies. The latest example might be Dogecoin, as promoted by Elon Musk. Similarly, Shiba Inu exploded in price and minted some new degen-millionaires in the process.
Meme coins often mimic other cryptocurrencies and do well in the short term. They are typically hyped up online by an influencer or investor for short term profits.
Utility tokens offer services within a network. Unlike security tokens, utility tokens don't pay out dividends. Instead, they are used to purchase services, pay network fees, and redeem rewards.
If you want to broaden your crypto portfolio with altcoins or learn to trade, you need to know the best trading strategies.
To secure your crypto investments, typically, the best time to invest in altcoins is just before the next Bitcoins price halves, and the next halving will roughly be in 2024.
However, this strategy also carries a lot of risk since many of these coins could be "rug pulls" (an expression referring to the founder/team quitting a project and selling out their stake, which causes the price to tank).
Important: Based on the 2017-2018 cycle, the best time to sell altcoins is 1-2 weeks after the Bitcoin bull run ends. Typically, speculators flip BTC profits into altcoins and then cash out. As a result, altcoins lose 99% of their value when Bitcoin enters a long-extended bear market. Be smart, take profits, and don't get too greedy.
So, if you want to begin investing in altcoins, you need to start paying attention to market news to see which altcoins to watch. If you're new and don't know which altcoins to buy, you might want to enlist the help of a wealth manager mobile app. Or, read on to find out the top altcoins right now.
The top cryptocurrencies to invest in 2021 are:
The above are all successful cryptocurrency exchanges as of 2021 and have promising futures. But, when they enter the next bitcoin/altcoin bear market, which is likely to occur in 2022 — whilst they’re hot today, this does not mean they will be around during the fourth Bitcoin halving in 2024.
If you're eager to begin investing in digital assets and crypto trading, you might want to assess your personal finance first. Enlist the help of a financial advisor or trading courses if you're not sure what to do. Investors should do their research. Altcoins come with the same risks, and potentially even greater ones, as Bitcoin investments.
Begin by deciding what type of altcoin you want to invest in and which cryptocurrency exchange trading platform suits you. Altcoins are an excellent way to diversify a crypto portfolio and are helping to reshape modern finance. With so many different strands of altcoin, the majority are still to make a name for themselves.
If you enjoy using our app, please take a moment to rate it in the App Store. Your feedback in the past has tremendously helped us at WeMoney to improve the app to help it be the best that it can be. A massive thanks to each one of you for making that happen!
Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.