What Is Altcoin? - Things New Traders Should Know

Ashish

Introduction

“Never put all your eggs in one basket” - is the most common advice from professional traders. However, new players often get stuck with diversity. In other words, they do not know much about coins other than Bitcoin. 

In this particular case, some experienced guys highly recommend Altcoin investment. So what is Altcoin? This article of Coin568 will provide you with a detailed answer.

What Is Altcoin?

It is best to start the informational section with a name analysis that can give you a rough idea of this coin. In common sense, Altcoin is made up of two common English words:

  • Alt stands for "Alternative," representing a substitution for Bitcoin
  • Coin, as every trader's default, means cryptocurrency.

Suggested through its name, Altcoin refers to a group of digital assets born after Bitcoin in 2010. Some of the ones that receive a lot of favor from traders include Namecoin, Litecoin, Cardano, Polkadot, Ethereum, XRP, etc. 

People usually define Altcoin by the nine most common categories, but the market actually has more than that.

Every day, exchanges are flooded with the arrival of more than 100 new units. Due to this rapid development, investors now can access a diverse list with more than 5000 choices, according to Coinmarketcap statistics. 

Which Gives Birth To Altcoin? 

Investors had never before imagined the rapid growth of Bitcoin. Now, it has proven to the world its important role in cryptocurrency trading. The price of this trending coin has continuously broken records in recent months and is forecasted to have a stable growth rate.

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However, no one can deny its existing limitations, including slow transaction speed, expensive costs, no anonymity, energy-intensive mining, etc. 

These shortcomings have planted the seeds of ideas and motivated the founders to launch Altcoin. Its primary purpose is to resolve the concerns of its predecessor. For example:

  • Litecoin and Fastcoin have improved the update time per block, leading to faster processing.
  • Monero, Dash, Zcash, Namecoin, etc., have good anonymity.
  • The transaction fees and today’s prices of these cryptocurrencies are lower than that of Bitcoin.

Despite our ongoing efforts, the market still failed to create a unit that reached the optimal level of perfection. In other words, regardless of the coins listed above or something else can only partially eliminate some disadvantages of Bitcoin. They have shortcomings besides their outstanding features based on modern technology. 

However, the birth of Altcoins has brought spectacular innovation to our community. One of the strongest influences is the decentralization of the cryptocurrency system.

Altcoin vs. Bitcoin In Comparison

Inheriting the upgraded blockchain technology, Altcoin possesses several outstanding characteristics. First, it assists in many consensus algorithms such as POS, POW, POA, NPOS, POB, etc. Plus, founders can use a variety of programming languages ​​that promote the creation of new units.

Meanwhile, Bitcoin limits the above features to only a single choice of each (POW and C++). In turn, its popularity stabilizes the supply to around 21 million coins. Investors always see this as a sign of long-term safe transactions.

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Another plus point is clear and connected information. Meanwhile, Altcoins, especially the less popular ones, easily become blind spots. Participants have difficulty making an accurate judgment about the price trend before making investment decisions.

Pros And Cons Of Altcoin

  • Pros

Diversity: Altcoins give traders more choices. Its entry makes the market more dynamic and competitive than ever.

New Technology: Innovation constantly overcomes the existing disadvantages of Bitcoin and impacts people's perception of the cryptocurrency market.

High Potentiality: Many units see a strong expansion and create a certain pressure with Bitcoin.

  • Cons

Risks In Waiting: Altcoin diversity poses a little challenge for management. Some have no practical application (nonsensical investment). Fụthermore, traders also face some scam projects, especially with less secure coins.

Price Pumping: Small units are easily manipulated by investors with large capital. Plus, the impact of external factors has stronger consequences. For these reasons, the price of Altcoins often fluctuates wildly.

Price-Determine Factors Of Altcoin

Market volatility may result from any minor impact. Here are some prominent factors that you should look out for

Bitcoin Price

As the mainstay on most exchanges, the growth or depreciation of Bitcoin affects other units. Usually, the virtual currency market takes BTC as a reference parameter for transactions. When its price increases, it pulls other coins to a new level and vice versa.

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Altcoin Development Team

When it comes to any coin discussion, professional traders are interested in the reputation of the founding team. In other words, the unit's clear development path and applicability determine the priority in purchasing demand. 

As a normal market operation, an increase in demand always leads to an increase in price. On the contrary, the lack of information inhibits the growth and, ultimately, the coin price.

Daily Highlights

Any Altcoin achievement may result in a rapid impact on its growth. For example, listing on a famous exchange, signing with a big corporation in the industry, etc. A good return on investment transfers to your wallet as soon as one of these events occurs.

Pump & Dump Effect

It is a phenomenon where some wealthy investors try to manipulate the market. They buy new Altcoins, which are often undervalued, then take advantage of their reputation and spread favorable news to increase the price. 

When the business opportunity comes, they sell and make huge profits. However, excess supply stimulates the market rebalancing, even reducing the price lower than before.

Fake News

Unlike the above factors, this one creates unexpected swings in the exchange. It hits customers' psychology and promotes unpredictable buying and selling behaviors.

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Conclusion

What is Altcoin? This article has shown how experienced traders expand their investment besides Bitcoin. This emerging group of coins recorded a formidable growth in recent times. 

However, its diversity requires careful consideration before making a move. As the last word, we hope you earn a big profit with our information.

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I am a professional blogger. I am writing almost every topic but mostly like to write on Health, Digital Marketing, Travel, Fashion.

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