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Any new cryptocurrency investor will already be familiar with Bitcoin (BTC) when they enter the scene. Since Bitcoin is the first cryptocurrency and remains the biggest coin on the market by a large margin, many will assume that it’s the safest investment option. This assumption may also be compounded by the fact that Bitcoin is likely the easiest cryptocurrency to acquire and trade, as there are so many places on the internet where you can buy it.
While there are undoubtedly many advantages to Bitcoin, however, investing in it exclusively isn’t necessarily the smartest approach when it comes to trading crypto. For best results, experts generally advise adding a mix of other cryptocurrencies to your investment portfolio. These cryptocurrencies are commonly referred to as altcoins, as they’re alternatives to Bitcoin.
Because there are literally thousands of altcoins to choose from, though, new crypto investors are often hesitant to consider putting their money toward anything other than Bitcoin. If you’re in the same boat, read on. This article will walk you through five of the major reasons why exploring these alternative cryptocurrencies could be one of the smartest investment moves you make.
Constant Innovation
Since Bitcoin launched in 2009, developers have gone on to make many more advanced cryptocurrencies with an even greater variety of uses. The privacy coin Monero (XMR), for example, promises a higher level of user security and anonymity than most other cryptocurrencies. Transactions using this coin, which can only be performed through a dedicated Monero wallet, are thoroughly obfuscated by the Monero network. Because of this, outsiders to the transaction can’t so much as view the amount being sent and received, much less the identities of the sender and receiver.
Besides increased privacy, many altcoins promise faster transactions than Bitcoin. Others insist that they levy the lowest possible transaction fees. Some boast more advanced blockchain technology, allowing users to connect to and bridge multiple blockchains. Certain cryptos even make use of programmable networks, allowing developers to use the crypto network’s blockchain to make decentralized apps.
The bottom line is that many altcoins on the market today utilize foundational technology in more complex ways, have more ambitious goals, or may be used for more purposes than Bitcoin.
Lower Price, Higher Growth Potential
A lot of altcoins go for much cheaper than Bitcoin, providing a more accessible entry point for novice investors who are only just getting their start with crypto. Many investors also believe that the potential returns on a relatively cheap investment outweigh the possible risk of that investment’s value dropping to zero. As cryptocurrency trading grows in popularity, many investors hope that mainstream interest in altcoins will rise in the years to come. This interest, in turn, is expected to raise demand for—and the value of—the altcoins themselves.
As Bitcoin is the largest, most popular cryptocurrency, it has seen comparatively less growth in value over time. More cautious investors, of course, are likely to see this relative stability as a virtue in the face of the often frantic volatility of the crypto market. Individuals who are primarily interested in high-risk investments and the potential for high rewards, however, are perhaps best served by other coins.
Useful for Managing Risk
As mentioned above, investing in altcoins is mainly popular among individuals hoping for high returns on short-term investments. Financial experts advise, however, that users also trade altcoins to mitigate risk, particularly those interested in inexpensive projects or tokens that don’t ask for a large initial investment. Many altcoins, for example, operate on separate chains that automatically award users who support the chain with continuing investments regardless of market conditions or Bitcoin prices.
The risk-mitigating utility of altcoins, experts say, is greatest for users with longer investment horizons. Those who have the time to wait may see value in putting down some of their hard-earned savings on an alternative coin, especially if they’ve done their research into which cryptocurrencies currently have the greatest long-term growth potential.
Can Be Staked for Rewards
Staking a cryptocurrency involves pledging a certain amount to that currency’s blockchain, where it will be used to verify transactions from other users. Users who stake crypto earn rewards over time, somewhat similar to making interest on the traditional currency stored in a bank account. While Bitcoin does not allow for this option, many newer altcoins allow users to stake their coins and offer appealing rewards rates.
Relatively Easy to Invest In
As discussed above, it’s a good idea to diversify your investment portfolio by putting your money into multiple cryptocurrencies. Fortunately, it’s relatively easy to execute this strategy, as most major crypto trading platforms offer their users a wide variety of coins to choose from.
In addition to Bitcoin, some of the biggest exchanges currently in operation support over 50 unique altcoins. Because of this, you’ll definitely be spoilt for choice when it comes to investment options. Hence, users who are buying or planning to buy Bitcoin will have no trouble purchasing other cryptocurrencies from the same platforms. Instead of going all-in on Bitcoin, consider using some of your crypto funds to support an altcoin or two.
Diversifying traditional investments is generally considered the smart thing to do from an economic perspective, and this is no less true for investing in crypto. Given that there are so many altcoins available on the market today, you’re sure to find one that’s well-suited for your current budget and investment goals.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.