Thousands more cryptocurrencies have sprung up due to cryptocurrency’s growing adoption. While they provide investors with options, they also make them uneasy. Given the industry’s relative youth, it’s prudent to discern between them. There are two types of cryptocurrencies – Altcoins and Bitcoins.
Bitcoins are the most popular cryptocurrency due to their widespread popularity. As the blockchain technology that underpins cryptocurrencies progressed, a slew of new crypto coins, including Ethereum, has emerged.
These altcoins are on the same principles as Bitcoins, but they go further by adding new features and functionality.
In this video, the Altcoin Daily YouTuber explains to the audience buying Bitcoins and Altcoins and investing in cryptocurrency in a detailed manner.
What exactly are Altcoins?
Altcoins are all cryptocurrencies other than Bitcoin. Altcoins use a peer-to-peer system and a comparative blockchain framework. Altcoins, like Bitcoin, require a unique mining mechanism for users to conduct safe and secure web transactions.
What exactly are Bitcoins?
Bitcoin is a decentralized peer-to-peer digital currency in which you can record all transactions in an openly accessible online public ledger. It does not require the employment of a third party to facilitate transactions, such as a bank or other financial institution.
As of Feb 04, 2022, there are approximately 17,327 different types of cryptocurrencies, according to the price-tracking website CoinMarketCap.
Are Altcoin and Bitcoin the same?
Bitcoin and altcoins differ in many respects, even though they are very similar and work simultaneously. The technique used to construct crypto blocks — is incredibly expensive intensive, and implementing and using Bitcoin is quite tough.
Altcoins, on the other hand, has gone beyond this. Instead, they employ the proof-of-stake system to acquire a competitive advantage, saving energy and shortening the time to validate a transaction. Furthermore, the smart contract possibilities of Bitcoin are severely limited. Altcoins have successfully addressed these grounds of complaint against Bitcoin by focusing on sustainability and scalability.
On the Ethereum blockchain, you can use Ether (ETH) as gas or payment for transaction expenses in smart contracts. The debut of the much-anticipated Ethereum 2.0 is attracting attention for these reasons, as they create a new identity for themselves.
Altcoins have enhanced functionality, transaction speed, and scale to accommodate the constantly growing demand. As the market for altcoins grows, many people wonder if any coins that follow it will challenge the original cryptocurrency’s dominance. Bitcoin is the first cryptocurrency, while all other coins are “Altcoins.”
Types of Altcoins
There are various types of altcoins.
Utility Tokens
Utility tokens assist in the provisioning of services inside a network. You can use Utility tokens for trading, buying NFTs, minting, redeeming prizes, paying network fees, and other functions inside a blockchain system. The most extensively utilized utility token that can accomplish these duties is Ethereum.
Meme Coins
Meme coins are hyped cryptocurrencies that achieve fame on the internet for a brief period, usually due to a celebrity or well-known personality trading in cryptocurrencies making a joke about it.
Elon Musk, for example, frequently uses Dogecoin to send cryptic tweets. When a post like this becomes popular, its shares and prices rise, but only for a short time.
Stable Coins
The coins with the lowest volatility are known as stable coins. Stable coins have their values to a more tangible asset, such as fiat currencies or precious metals, which aids in the redemption of users and holders when the currency declines in value. Tether (USDT), MakerDAO’s DAI, and the USD Coin are all notable altcoins in this category (USDC).
Security Tokens
Security tokens are comparable to digital liquid contracts in that they represent a piece of a bigger asset or business, analogous to traditional financial security. They become useful for tracking crypto transactions, and the potential of a higher price attracts investors.
Governance Tokens
Governance tokens are a form of utility tokens that you may use to buy voting privileges on the blockchain, such as voting in global polls. As the name implies, governance tokens allow users to vote on choices that affect blockchain ecosystems.
Governance tokens arise because of the democratic aspirations of crypto coders, developers, and community members in the world of decentralized finance (DeFi), where crypto holders undertake complicated transactions that leverage coins for advanced yields — comparable to lending and trading.
Forks
A fork is a type of cryptocurrency created when coders make a significant change to a blockchain protocol, which changes how cryptocurrencies are recorded, traded, and received. There are two forks: “soft forks” and “hard forks.”
Forks can either make minor changes to the currency, branch off into a new type, or improve the blockchain system to the point that old transactions are no longer legitimate. Any blockchain can fork, which may necessitate upgrades across all computer systems (nodes) that keep it running.
Should You Invest in Alternative Cryptocurrencies?
Bitcoin, and especially altcoins, are highly speculative, according to experts. Because of its smart contract capabilities and the appeal of digitally scarce art known as non-fungible tokens, Ethereum, the most widely recognized altcoin, has risen dramatically since its 2015 inception (NFTs). ETH has a market capitalization of $500 billion at writing.
However, don’t let the popularity of altcoins cause you to be afraid of missing out (FOMO). Even crypto fans have doubts about the rise of cryptocurrencies.
Altcoins are continually working to become self-contained from the Bitcoin structure, allowing them to have a value unaffected by fluctuations in Bitcoin prices. Their value has surged because of their growing popularity in the non-fungible token (NFT) market. Ethereum has a market capitalization of about USD 377 billion at writing.
They are, however, always accompanied by a healthy dose of scepticism. Nelson Merchan, CEO of blockchain events company Light Node Media, believes that one should take things slowly and not look at cryptocurrencies to make quick money. Experts always recommend investing in cryptocurrencies in the two most well-known currencies if one must invest in cryptocurrencies.
Will Altcoins survive?
It’s impossible to anticipate which cryptocurrencies will have long-term value compared to those basking in the light. The rise of the Omicron cryptocurrency, which saw its value skyrocket 1,000 percent afterword of a breakthrough coronavirus variation revealed — only to drop by nearly as much — as a sad example of crypto’s fleeting worth.
Altcoin investing isn’t necessary for those who like to invest passively in the overall market. If you want to get into crypto and learn more about DeFi, you need to start learning about the many sorts of altcoins and how they work.
Finally, consider a scenario where clients exchange bitcoins for things like paying service fees or storing files, as blockchain technology becomes more generally accepted. Few would have anticipated that we’d be using our iPhones to transmit digital payments to our friends and family ten years ago. Still, apps like Venmo and CashApp are already ubiquitous.
Expect crypto technology to continue to impact how we send, receive, and use money, but don’t get caught up in the hype if you’re looking for a long-term investment.
Why are people investing in Altcoins?
Change in Protocols
Each cryptocurrency has its protocol, which you can consider as the rules governing how a network functions. Users buy and trade Bitcoins via a cryptographic protocol that uses digitally signed encrypted communication. Each cryptocurrency has its protocol that determines the blockchain’s structure.
The more people who utilize and interact with a protocol, the more valuable the coin becomes. Strong use cases for cryptocurrencies could indicate that they have strong fundamentals and will withstand the fierce competition in the bitcoins’ industry. Crypto functions with solid infrastructure on their blockchain may see a higher level of acceptance.
Cheaper
Many altcoins are far less expensive, making them more accessible to individual investors. Investors are looking for new cryptocurrency options that are low in price because they provide the most upside potential as crypto’s popularity grows.
Altcoin Season
The term “altcoin season” refers to when altcoins gain traction and threaten Bitcoin’s supremacy, with one or more cryptocurrencies finally surpassing Bitcoin. Bitcoins are one cryptocurrency with a wide range of applications, but many altcoins serve various needs. DeFi, gaming, and the metaverse, according to Levy, are three areas where altcoins can continue to grow in market size.
Conor Kenny, in this video, explains Meta Verse Tokens – Sidus, Solchicks, Crypto Cavemen.
Will Bitcoins outperform Altcoins?
In an email to CoinDesk, Alex Kuptsikevich, an analyst at FxPro, wrote, “Since late last year, there has been a persistent trend that even bitcoin’s calming is enough for altcoins to return to growth and beat the first cryptocurrency.” If buyers can keep support over $37,000 over the weekend, technical signs hint at more price rises for bitcoin. A clear move above $40,000 might also herald the beginning of a rebound phase.
If buyers can keep support over $37,000 over the weekend, technical signs hint at more price rises for bitcoin. A clear move above $40,000 might also herald the beginning of a rebound phase.
Several indicators, including the bitcoin Fear and Greed Index, the relative strength index (RSI), and a six-month high in the bitcoin options put/call ratio, has foreshadowed negative extremes in the crypto market during the last few weeks. Some analysts believe crypto purchasers will return, similar to what happened after the market bottomed out around $28,000 BTC in July 2020.
Conclusion
Supply and demand, investor and user sentiments, government laws, and media frenzy all influence the price of Bitcoins. Price volatility is by the interaction of all of these causes. It’s uncommon to watch cryptocurrency news without hearing an investor or fan’s prediction for Bitcoin’s price. Unfortunately, no one knows how high or low the price of cryptocurrencies will go.