An Altcoin combines “alt” or alternative and “coin” or cryptocurrency. This doesn’t mean that only BTC is referred to as altcoins. BTC has always established itself as the “gold standard”of the universal cryptocurrencies and has brought about a revolution in the world of finance.
Altcoins were introduced by the second and thor generation blockchain cryptocurrencies like LTC and ETH. This article clarifies whether you should buy or sell altcoins in the future.
Types of Altcoins
Altcoins are classified between Proof of work(PoW) and Proof of stake(PoS) altcoins, stablecoins, and decentralized fiance(DeFi) altcoins.
PoW and PoS altcoins
The PoW consensus method requires verification and process transactions, whereas the PoW altcoins include the LTC, BCH, and ZEC. Here the validators verify the transactions in the PoS model.
The coins that have their values pegged to fiat like USD are known as Stablecoins. The value here is equivalent to one unit of the fiat currency, such as USDT.
Stablecoins usually keep cash or other assets that are equal to the number of coins in circulation in their reserve. This means that even if the coin fails or encounters certain issues, the holder will still be compensated.
These altcoins allow holders to both lend and borrow their cryptocurrencies and earn any passive income. Some of the most common examples are COMP, SNX, UNI, etc.
Difference between Bitcoins and Altcoins
Altcoins differ from BTC by expanding the capabilities and filling the gaps left by BTC’s alleged flaws. Different types of altcoins, such as LTC, ETH, BCH, and ZEC, are discussed below.
Litecoin vs. Bitcoins
Litecoin was introduced back in 2011 to make further improvements to the original BTC technology. It differs from BTC as the time needed to construct a block from 10 to 2.5 minutes which eventually increases the number of completed transactions considering the speed of the network.
This was followed by Segregated Witness(SegWit), Nimble Wimble, and Lightning Network to decrease the overall congestion and improve efficiency while using Scrypt.
Ethereum vs. Bitcoin
Born in 2015, ETH, the blockchain technology, creates a specific decentralized Turing complete virtual machine that codes from anywhere on the network. This also introduced smart contracts demonstrating the decentralized application’s fundamental logic. The PoS algorithm and the innovative layer were added to this network’s value, making ETH an intrinsic value which is not the case with BTC.
How to buy Altcoins?
One of the major questions most people have is whether they should invest in altcoins or not. Here are some integral aspects you need to consider.
Determine the percentage of altcoins you want to add
Your investment strategy must depend on how risk-averse you are and the extent of risk you can take for your portfolio. Based on this risk return, you can determine a certain portion of altcoins that you want to add to your portfolio.
Check out the altcoins you want to invest in.
The key to altcoin trading is to determine the best altcoins on the project’s website, social media accounts, and others. This will help you understand whether the current wallet is compatible with the altcoin you are about to buy or if you need a completely new cryptocurrency wallet.
Choose a suitable exchange and currency pair.
So many exchanges do not even support buying altcoins with fiat. Hence, you need to buy BTC to proceed. Once you acquire BTC, it’s time to discover one or more exchanges that accept your altcoins. Register and proceed with transferring your BTC but keep the pairing in mind.
Place the order for your preferred BTC for the altcoins you are about to buy.
Store your Altcoins into a crypto wallet
Once the transaction is completed, you need to store your altcoins on the exchange. The crypto assets need to be stored off, exchanged and stored into any wallet in case you want to purchase for a longer duration. You can choose between hot, cold, web, mobile, or desktop wallets based on your requirements.
How to sell altcoins?
There are still many investors that are willing to sell out their cryptocurrencies instead of keeping them for longer durations. All you need is to find an exchange that allows you to trade the altcoins, add the number of tokens, and hit the Sell button.
What is Altcoin Season?
The term refers to a certain period wherein the price of altcoins surges and may even exceed BTC and Fiat currencies like the USD. This was first encountered in 2017 when the ETH smart contracts functionality started the development of new coins.
So many new crypto investors reaped massive rewards due to this price hike. However, there is no confirmed way of understanding the market and the season. Nonetheless, you can always refer to the Altcoin Season Index for some predictability and assess the market sentiment and calculate if the BTC or altcoins have any space in the cryptocurrency market.