Bitcoin ushered in the cryptocurrency era in 2009, and quickly became the go-to name whenever anyone talked about digital currencies. In fact, Bitcoin dominated the growing scene so much that any other cryptocurrency was considered an “altcoin,” an alternative to Bitcoin. And that name stuck, even though today there are literally thousands of competitors to the original digital currency.

Here are the basics on altcoins, which ones to watch this year, and whether altcoins will overtake Bitcoin.

What are altcoins?

An altcoin is an alternative cryptocurrency to Bitcoin, which itself was the only cryptocurrency at one point in time. During its early years, Bitcoin dominated the field so much that other rivals were defined in relation to the original cryptocurrency. It was Bitcoin — and everything else. So everything that wasn’t Bitcoin was, somewhat derisively, called altcoins or perhaps even less charitably, sh*tcoins, in a rhyme with the original digital currency.

So, altcoins are any cryptocurrency that is not Bitcoin. In the early years of cryptocurrency, this kind of definition made a lot of sense, since Bitcoin took up most of the market attention, and competitors created dozens or even a few hundred alternative coins. Today, some experts estimate the number of individual cryptocurrencies at around 15,000.

That said, Bitcoin remains by far the largest cryptocurrency, with a market capitalization — the value of the total number of coins in existence — more than three times that of the next largest player, Ethereumaccording to CoinMarketCap.com. The size of other players drops rapidly from there.

Types of altcoins

With literally thousands of cryptocurrencies in existence, speculators looking to buy altcoins have plenty of options. But many trades focus on the biggest players and those with some of the best technical specifications, such as fast transaction times.

Mining-based currencies

Mining-based currencies are mined into circulation by networks of computers solving complex mathematical problems, often requiring a lot of energy. The world’s largest cryptocurrency — Bitcoin — is a mining based currency but many altcoins too.

Stablecoins

Stablecoins are a type of cryptocurrency whose value is pegged to another asset, usually the US dollar. Stablecoins track the underlying asset, attempting to maintain the price of the currency equivalent to the currency. Stablecoins are often backed by assets such as real dollars (although often bonds and other assets) giving a stablecoin a basis in real currency. Examples of stablecoins include Tether and USD Coin.

The story continues

Despite their nickname, stablecoins are sometimes anything but stable. TerraUSD, a stablecoin pegged to the dollar, made headlines in May 2022 when it fell to just pennies on the dollar. The coin’s automatic stabilizers couldn’t keep up with the orders of traders looking to sell their positions.

Security Tokens

A security token is a type of currency that represents a fractional interest in another asset. For example, a work of art might have security tokens that share ownership of that asset and validate ownership of it. Or a company might have its ownership represented by security tokens. So this type of token could allow more traditional assets to be securitized.

Meme coins

Memecoins are a type of cryptocurrency that have gained public interest, perhaps through social media or tweets from celebrities like Tesla CEO Elon Musk. Meme coins often have a lottery aspect, rising in price very quickly and then falling precipitously. Popular memecoins include Dogecoin It is Shiba Inu.

Popular Altcoins

Here are the top 10 cryptocurrencies, as of July 18, 2024, according to CoinMarketCap:

1. Bitcoin

2. Ethereum

3. Mooring

4. BNB

5. Solana

6. USDC

7. XRP

8. Ton Coin

9. Dogecoin

10. Cardano

These ratings can fluctuate, of course, as each coin mines new coins and the coin’s price goes up or down, often with significant volatility. Here are more details on top cryptocurrencies by size.

What to consider before buying altcoins

If anything could be even riskier than investing in the handful of top cryptocurrencies, it would be buying relatively unknown altcoins. Here are a few things to consider before diving into altcoins expecting a lottery-like payout:

• Cryptocurrency is driven entirely by sentiment. Since cryptocurrency is generally not backed by the assets or cash flow of an underlying company like a stock, it is driven solely by sentiment. Sentiment can range from extremely bullish to depressingly bearish, meaning that altcoins rely on traders being or becoming more bullish in order for their prices to rise.

• Investors focus on the most popular coins. Because crypto is driven by sentiment, investors flock to the most popular coins, focusing on Bitcoin, Ethereum, and a relative handful of others. While every now and then an altcoin breaks out — Dogecoin or Shiba Inu are prime examples — literally thousands of others remain undiscovered. This means that if an altcoin goes to the doghouse, it may never return to popularity, costing you most or all of your investment.

• Do you have money you can afford to lose? Given the extreme risks involved in altcoins, as well as their volatility, it’s important to ask yourself whether you’re only betting money you can afford to lose. Cryptocurrency and other financial markets are not places where you invest your rental income or other funds you need.

• Focus on the technical capability of an altcoin. If you are looking to invest in an altcoin, study its technical capabilities. Some altcoins like Solana have soared because they provide high functionality at low cost, for example. A cryptocurrency’s features can help keep it at the forefront of the public imagination and therefore make it an attractive trading vehicle that traders can scoop up.

When buying highly speculative assets like cryptocurrencies, it is important to understand that you could lose your entire investment. At the very least, traders should expect extreme volatility.

Conclusion

With literally thousands of them in existence, altcoins continue to gain popularity. While no single coin may be able to displace Bitcoin’s position as the leading cryptocurrency, altcoins as a whole may continue to chip away at the leader’s market share even as the total crypto pie continues to expand.

Fuente