- Is Investing in Altcoins a Good Option?
- Advantages and Disadvantages of Altcoin
- What’s next for Altcoins?
‘Altcoins’ by many are considered as an alternative to Bitcoins. As of November 2021, as per the data provided by a leading crypto exchange, Bitcoin and Ether accounted for 60% of the total crypto market and the rest was altcoins.
For new investors, they must possess complete knowledge about investing in altcoins. Some of the questions that will help investors are answered below.
Is Investing in Altcoins a Good Option?
The altcoin market is on a rise. In the past few years, the number of altcoins that are enlisted in the crypto market has multiplied, thus attracting lots of retail investors. These investors bet on the market to gain short-term profits and don’t provide sufficient liquidity in the market, as they don’t have the necessary capital. Altcoin valuations are subject to quicksilver volatility due to thin marketplaces and a lack of regulation.
In the past, we have witnessed huge price fluctuations in cryptocurrency within just a few weeks. Like in 2018, Ethereum was at its all-time price high of $1299.95, within a few weeks it went down to $597.36 and by the end of the year, it was at $89.52.
After all these years, there still is a problem; Crypto markets are not mature enough. No specific investment method has been identified to evaluate cryptocurrencies and investments are still driven by speculation. There are also various cases of dead cryptocurrencies or currencies that have completely vanished after collecting money from investors.
Therefore, the altcoin market is for investors, willing to take risks in a market that is highly volatile. The market will be beneficial to investors who keep a cool mind during price swings.
Advantages and Disadvantages of Altcoin
The advantages offered by Altcoins are:
- Altcoins address the shortcomings of Bitcoin and are considered to be the better version of Bitcoin
- Some altcoins have gained recognition from mainstream institutions, resulting in high valuation.
- Altcoins offer a lot of choices to investors to choose from as different altcoins perform different functions in the crypto economy.
Some disadvantages of altcoins are:
- The investment market of altcoins is much smaller.
- High price volatility in case of altcoins due to absence of regulation for investment.
- Distinguishing between altcoins can be very difficult, thus making investment decisions unclear.
- Due to many dead altcoins, many investors have lost a lot of money.
What’s next for Altcoins?
At present, there are thousands of altcoins present in the market, each claiming to serve a different purpose and market. It is very unlikely that the altcoin market will get consolidated into a single cryptocurrency. But it is for sure that around 2,000 altcoins that are listed in the market at present will not survive in the future. In the future, the altcoin market is expected to exist around a small group of altcoins, having strong utility and use cases.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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