“Bitcoin price has skyrocketed and many people have missed this train and buying a single Bitcoin is out of the reach of most of the investors in the crypto world, especially the retail investors. If you have missed the Bitcoin train, there are various altcoin trains that you might jump onto. But choosing the right train becomes extremely important as the chances of derailing are as high as it gets.”
What are Altcoins?
Before jumping into buying the altcoins, you first must understand what they actually are. Any cryptocurrency coin or token that is not Bitcoin comes under the category of Altcoins. The most famous altcoins include Ethereum, Cardano, Solana and BNB etc. The altcoins or the alternate coins (to Bitcoin), are high risk category coins as they are even more volatile as compared to Bitcoin and thus must be chosen cautiously. Here a comprehensive guide is prepared for you so that you can make a rightful decision regarding choosing the right altcoin in your portfolio.
The Guide to Picking the Right Altcoins
The following is a 3 step guide to analyze and choose the right cryptocurrency altcoin:
Step-1: Find the Value Proposition using White Paper
Every cryptocurrency project has a white paper that details entire information regarding the project. The first step is to completely analyze the white paper of an altcoin cryptocurrency and find the value proposition of the project. The better the value proposition and lesser the competitors, the better is the future potential of that altcoin. For example, Bitcoin had a value proposition of a decentralized digital currency and a peer-to-peer medium of exchange. At the time of Bitcoin, there was no other currency that provided this value proposition and the rest is history.
Step-2: Analyze the Tokenomics of the Altcoin
The measure of price of an altcoin is the demand and supply mechanics of that coin. Higher the demand and fixed (or decreasing) supply of an altcoin will determine its current and future price. Thus, after filtering the altcoins with great value propositions, you must understand the tokenomics of these coins. A coin with unlimited supply will be inflationary in nature and must be avoided. The coins which have a limited supply or a decreasing supply will be priced higher in the long term if the demand is ensured.
Step-3: Assess the Team and Stakeholder behind the Project
Many altcoins today have anonymous teams and stakeholders creating a red flag. Thus, after understanding the tokenomics of the coin, you must assess the team behind the project. The project which provides clear information regarding the team and their experience, are the ones to be chosen over the projects with anonymous teams. The non-anonymous teams will ensure that the project is not a rug pull and your money is safe with them.
Once all the basic information regarding the altcoin is analyzed and assessed, you must pick the altcoin as per your risk appetite and the history of the performance of that coin.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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