Bitcoin Or Altcoin: How To Prioritize Your Investment?
Every day you are hearing about the price movements in cryptocurrency and people who are not aware about what is this new technology for investing are wondering why so much is being reported about the new investment craze among youngsters. How can one make money out of such investments? Are they trustworthy? How riskier is our investment in cryptocurrencies. People are also talking about Bitcoin, Altcoin etc. What are they? What are your chances if you invest in cryptocurrencies? Let’s find out.
What’s Bitcoin?
Bitcoin was created in January 2009 and is regarded as a decentralized digital currency. The world is yet to find out the person or persons who created this technology but it follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto.12.
We don’t have to pay huge transaction fees for Bitcoin when compared with traditional online payment mechanisms. Besides, unlike currencies controlled by regulating agencies in countries, Bitcoin is operated by a decentralized authority.
It is known as a cryptocurrency because it uses cryptography to keep it secure. Physical bitcoins are not available but the balances are kept on a public ledger known as a blockchain. The transactions are verified by a process known as “mining.”
Though Bitcoin is not legal tender in a majority of places, it is very popular. Following the success of Bitcon, hundreds of other cryptocurrencies are available in the market now. They are known as altcoins. Bitcoin is now the world’s largest cryptocurrency by market capitalization.
Unlike fiat currency, Bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain. It is also one of the first digital currencies to use peer-to-peer (P2P) technology to facilitate instant payments.
What are Altcoins?
Altcoins are cryptocurrencies other than Bitcoin. Though they appear similar in operations some altcoins use different mechanisms to produce blocks or validate transactions. You can notice that whenever there is a surge in the price of Bitcoin, altcoins tend to go up. Similarly, when there’s a drop in the price of Bitcoin, altcoins will also follow.
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There are more than 10,000 cryptocurrencies available in the market now. Some Altcoins have the potential to give incredible returns. However, you have to also realize that some altcoins will never take off. On the other hand, those who have bought Solana for $2 saw their investment surge over $200.
When you take the latest data, there are more than 14,000 cryptocurrencies in the world. According to CoinMarketCap, Bitcoin and Ether alone accounted for nearly 60 per cent of the total cryptocurrency market in November 2021.
Solana and Binance Coin are the largest altcoins by market capitalization as of November 2021. Altcoin is a combination of two words “alternative” and “coin”. In short, they act as alternatives for Bitcoin. They all want to emulate the success of Bitcoin in future.
Ether is the second-biggest cryptocurrency in the world by market cap. Altcoins come in various flavors and categories, including mining based altcoins, stablecoins, etc. Some important stablecoins are Tether’s USDT, MakerDAO’s DAI, and the USD Coin (USDC). Then there are Security Tokens and Meme Coins.
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds.
Should you invest in altcoins?
Like we always suggest, it is important for you to do proper research before putting in your money. Considering the nascent state of altcoins, you have to properly select the currency. Otherwise, chances are that you could lose your money soon. If we take the example of Ethereum’s ether, it reached a peak of $1,299.95 on Jan. 12, 2018. However, just some weeks later, it crashed to $597.36 and went on to trade at a value of $89.52.
However, when you look at the price of ether in Novemeber 2021, it is close to $4,750. So if you have invested at around $90 some three years ago, you can calculate the sort of increase in your investment now.
In short, we can say that altcoins have the potential to go amazingly up and at the same time they can crash to new lows. You have to decide when to enter the market, how long you have to hold on your money, and finalizing the perfect time to exit the market.
