Investing in altcoins: types, features, trading

Altcoins are cryptocurrencies that provide an alternative to Bitcoin. Like bitcoin, they run on blockchain technology and use peer-to-peer systems. Most altcoins either have a different functionality than Bitcoin or are invented for a specific purpose.

For example, Ethereum, the second most popular cryptocurrency, runs on the Ethereum blockchain. It can run applications, execute contracts, and once it transitions to a proof-of-work mechanism, it plans to be less energy intensive than bitcoin.

Are all altcoins the same?

There are many altcoins and each of them was invented for a specific purpose. Examples of mining-based altcoins include:

• Ravencoin;
• Monero;
• Litecoin;
• Zcash.

We should also note that not all coins are mined. Some of them are released immediately as part of the initial coin offering, such as XRP.

stablecoins

Cryptocurrencies have a reputation for being volatile - coins can go to the moon or plummet to near zero. Stablecoins typically mitigate this volatility by tying their value to a tangible commodity such as fiat currency, precious metals, or other cryptocurrencies.

For example, Tether (the third largest coin on coinmarketcap.com) has its value “pegged” to the US dollar. Whenever Tether issues new tokens, it allocates the same amount of US dollars to its reserves, making Tether cash-backed. The Tether coin will always be worth $1, making it very stable.

Algorithmic stablecoins are more controversial as they use little to no collateral. Instead, they use complex minting and burning mechanisms to maintain their peg to a particular currency. Many crypto experts are skeptical about the long-term viability of algorithmic stablecoins. And the recent collapse of Terra (UST) and its sister coin LUNA confirms these doubts.

meme coins

There is a sense of humor in the world of cryptocurrencies and several cryptocoins have been invented for no value or purpose at all. These coins are usually created as a joke or were inspired by a meme, hence the name “meme coins”.

The most popular meme coin that has made its way into mainstream culture is Dogecoin, inspired by the famous 2013 meme.

Memcoins tend to be volatile and easily swayed by famous investors like Elon Musk. He regularly makes Dogecoin fall and rise with his tweets. For this reason, don't take meme coins too seriously and invest with caution.

Game coins

Game coins are a relatively new class of cryptocurrencies used as in-game currency for blockchain-based metaverse games.

Previously, online gamers exchanged their fiat money for in-game currency. However, blockchain-based games are increasingly turning to cryptocurrencies to allow users to buy weapons, gear, and more. These games often reward their users by giving them tasks to complete that earn more cryptocurrency.

The most popular altcoins and where to buy them

As of May 2022, here are the ten most popular altcoins by market capitalization according to CoinMarketCap.com:

• Ethereum (ETH);
• Tether (USDT);
• Dollar coin (USDC);
• BNB (BNB);
• Cardano (ADA);
• XRP (XRP);
• Binance USD (BUSD);
• Solana (SALT);
• Dogecoin (DOGE).

The top ten coins within bitcoin are well established and can provide good returns in the short term, although there is no guarantee of how they will perform.

What should I do if the altcoin is not listed on the exchange where I trade?

The coins mentioned above are quite popular and many of them are considered stablecoins. Therefore, they are easy to find and purchase on popular cryptocurrency exchanges.

On any exchange, you will find all the currencies listed above, but a less popular currency may not be available. Look. Almost all exchanges publish catalogs of the coins they support.

Investing in altcoins can be an exciting experience. But keep in mind that these coins tend to be volatile and often lose their value. For this reason, consider limiting your investment in altcoins to a small percentage of your portfolio. And be prepared for any of your altcoins to plummet in price at any time and for any reason.

To avoid disappointment from trading or mining, be clear about your intentions for each coin. Perhaps you are looking for quick, short-term gains. Perhaps you are looking for a currency that allows you to play blockchain games and you are not worried about its value against the dollar.