Altcoins are called alternative coins and they are cryptocurrencies that are not Bitcoin. So any cryptocurrency that isn’t Bitcoin is an Altcoin. This means that Ethereum, Litecoin, Dogecoin and all the other types of cryptocurrencies are known as Altcoins. They are called Altcoins because they present themselves as better alternatives to Bitcoin. These coins share a characteristic with Bitcoin but are also different from Bitcoin in a couple of ways. They are similar (to Bitcoin) in the sense that they share code and function as peer –to-peer systems and they are different (from Bitcoin) in the sense that some altcoins use a different mechanism to validate transactions. Altcoins are also different from Bitcoins because they (altcoins) provide new additional capabilities such as smart contracts e.g. on Ethereum, and low-price volatility. Altcoins emerge because they want to replace Bitcoin and this is why most of them do not last long.
TYPES OF ALTCOINS
Currently, there are over 9000 cryptocurrencies. In fact, altcoins account for over 40% of the total cryptocurrency market while Bitcoin accounts for 60% of the crypto market. Altcoins can be grouped into:
- Mining-based cryptocurrencies
- Security tokens
- Utility tokens
Altcoins are developed to target the limitations of Bitcoin and then address such issue.There has been a recent explosion in the price of Altcoins like Bitcoin cash and this has made a lot of people start looking into investing in different altcoins. There are so many benefits of investing in altcoins. For example you can store altcoins with the hope that their value will increase over some time. Another benefit is that trading Altcoins is easy compared to Bitcoins i.e the competition to invest in Altcoin is low. This means that you can easily invest in Altcoins in minutes. No stress!
Investing in Altcoins is good. But anything that has a good side must also has its bad sides. Here are some of the disadvantages of Altcoins:
- There are too many Altcoins in the crypto market. Over 9000! It makes it hard to diversify your own portfolio.
- The market cap value of Altcoins is low, lower than Bitcoins. Altcoins have a smaller investment market compared to Bitcoin. Bitcoin controls the larger percentage. What this means is that if you invest in altcoins, you will get lower returns than those who invest in Bitcoin.
- There is no regulation and a defined criterion for investment. Because of this, there are fewer investors in the altcoin market. This makes their prices more volatile, compared to Bitcoin.
- Because of the availability of various altcoins, a lot of them are “dead” or non-existent. A lot of people might have invested in them and this may have ended up sinking their money. Out of 9000 cryptocurrencies, how many do you know? Imagine investing in one of them some time ago hoping that it will matter today and now, it doesn’t.
- A lot of trading sites do not provide fiat money withdrawal. What this means is that you will have to convert any altcoin you want to cash to Bitcoin, which can then be converted to USD. In other words, you cannot cash out any altcoin directly. And of course, as a trader, you have to pay a fee for any transaction, which can be surprisingly large.
Investing in Altcoin can actually bring good investment options for you, especially if you know the right ones to invest in. Ethereum, Dogecoin and Litecoin are good Altcoins to invest in for now.
Nonetheless, are you aware that PRESTMIT now trades DOGECOIN and LITECOIN? Yes! On our platform, you can now trade your favourite Altcoins.
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