Altcoin is a combination of the two words alternative ‘alt’ and cryptocurrency referred to as ‘coin’. Together they are creating a category of cryptocurrency as an alternative to the digital Bitcoin currency. After bitcoin’s successful story many other coins where created in order to provide solutions in the drawbacks of Bitcoin. Most altcoins are build based on the basic structure of Bitcoin which is why they tend to mimic its price movement. However, they share some different characteristics such as a different consensus mechanisms to complete transactions.
As mentioned above, because they are derived from Bitcoin, they tend to follow its price movement. Analysts say that the maturity of cryptocurrencies investing ecosystems and the rapid growth of new markets for these coins their price movement will become independent.
FACT: As of March 2021, there were almost 9,000 cryptocurrencies. According to CoinMarketCap, altcoins accounted for over 40% of the total cryptocurrency market in March 2021.
Take for example Filecoin which is used to purchase storage space on a network. The fact that it might be used to purchase services or redeem rewards makes it a utility token.
They resemble traditional stocks but instead are in digital forms. Security tokens give back to its owners’ equity, or dividend payout and the are attractive because of their speculation of price appreciation. Just like stocks these kind of tokens are offered to the public through initial coin offerings (ICO), instead of initial public offerings (IPO).
Cryptocurrency trading is characterized by volatility since launch. Stablecoins, as their name suggests aim to reduce this volatility and be more stable by pegging their value to precious metals, fiats or o ther cryptocurrencies. Social media behemoth Facebook’s Diem is the most famous example of a stablecoin backed by the dollar. Other examples of stablecoins are USDC and MakerDAO.
Mining-based alt coins are mined into existence which is using a Proof of Work method where the system generate new coins by solving difficult problems to create blocks. Zcash, Monero and Litecoin are examples of mining coins. There is also the pre-mined alternative just like Ripple XRP, that are produced through an algorithm but are distributed before they are listed in cryptocurrency markets.
The market of altcoins is getting bigger and the number of altcoins getting listed in cryptocurrency markets have been multiplying in the last decade with a special increase in the following year. Investors are attracted to this new market due to the absence of regulatory supervision or institutions being involved and therefore manipulating the price.
Cryptocurrencies are considered risky investments because they are not yet mature. This means that there are no defined investment criteria or metrics to actually evaluate its future perfromace. Therefore, most of the cryptocurrencies are driven by speculation. Coins that die didn’t not manage to gain much traction from the crowd or did not do enough marketing.
If you are willing to take the risk of operating in an unregulated market should consider getting involved. In the last month or so, we are experiencing a very extreme shift from the stock market into the crypto market.
Growth stocks are down at least 75% from their highest highs and there is almost nothing interesting rallying. On the other hand, altcoins have been exploding more than 1000% or even higher. There is no doubt that some young and early investors turned with hounded into millions with the famous Dogecoin, Safemoon and other famous altcoins. The cryptocurrency has created a new term called the “Overnight Millionaires”.
The reason of its traction is because people are move than willing to undertake a risk for a bigger reward. Besides, institutional and the financial system in general has not yet shifted to this world but even if they do is kind of difficult for them to hide from the order books.
There are thousands of altcoins nowadays and each one of them is serving a different purpose. Due to the high number of them it is difficult for all of them to dominate the market, so the ones that will last are the ones with strong utility and use cases. Anyone can argue that when thinking of Dogecoin or Safemoon but especially Dogecoin that has been prevailing due to Elon Musk’s twits.
Even though there have been some concerns that the U.S. government might ban Bitcoin and other cryptocurrencies this seems to be more unlikely with the recent crypto additions into Visa Inc, and MasterCard. Big institutions have been investing and adding Bitcoin into their balance sheets therefore this makes it even more unlikely to happen.
Food for thought: But why would the government want to ban cryptocurrencies if the young generation will now be wealthy enough to pay their taxes?
The total market value of all cryptocurrencies now stands at $2.48 trillion, up from less than $1 trillion at the beginning of the year.