What are altcoins? Top 10 most potential Altcoins today

Altcoin is considered a fertile market for traders to make a profit if they grasp the right time. This term is probably not too strange to investors, but not everyone understands its exact meaning. Finhay’s article below will answer the question of what Altcoin is as well as how to invest effectively with this digital currency.

What are altcoins?

Altcoin is a combined term of Alt and Coin, Alt can be understood as an alternative form and Coin means money. Thus, Altcoin means an alternative cryptocurrency to Bitcoin. To put it simply, there are two main types of coins on the market: Bitcoin and Altcoin, non-Bitcoin coins are called Altcoins such as ETH, SOL, AXS…

The world’s most reputable cryptocurrency price tracking website CoinMarketCap statistics that, as of February 2022, there were 17,642 cryptocurrencies and this number continues to increase every day.

What types of Altcoins are there?

After learning what Altcoin is, investors often wonder: So what coins does this electronic currency include? Depending on the nature, Altcoins are divided into four main groups including: Platform Coins, Stablecoins, Security Tokens and Utility Tokens.

Platform coins

Coins issued on a private Blockchain are called Platform Coins. Most altcoins are tokenized from Bitcoin and have a mining process similar to Bitcoin, which is conducted based on the Proof of Work consensus mechanism. Although there are some similarities, each platform coin has its own function and purpose.

Altcoins are created by miners using coin mining machines and working together to solve a puzzle given by the system. Specifically, the puzzle is to find the hast value for the block that satisfies certain conditions.

The person who gives the correct answer first will receive a certain amount of generated coins. Famous altcoins can be found such as Dash, Monero (XMR), Litecoin (LTC), Zcash.

Currently, the market has a number of coins replacing Proof of Work with different methods to overcome the disadvantages of Blockchain 1.0, the most popular are Proof of Stake, Delegated Proof of Stake or Proof of Authority.

Stablecoins

If the cryptocurrency market is always labeled as having highly volatile prices, then Stablecoins are the coins designed to go against that perception. These are electronic currencies that are able to maintain stable prices.

Currencies with large fluctuations in value such as Ether (ETH), Bitcoin (BTC) or Dogecoin (DOGE) always open up opportunities for speculation, but they also have the disadvantage that constant change causes difficulties in daily payment.

Stablecoin prices often closely follow the price of fiat money or a type of asset. These currencies are global and do not depend on any central bank.

You can use Stablecoins to convert value at low cost but still maintain stable prices. Using a typical Stablecoin like USDT, USDC or BUSD will help you easily get in or out of cryptocurrency volatility.

Securities tokens

Security tokens or Security Tokens are digital assets issued on a blockchain and represent shares in the underlying stock market. To put it more simply, stock tokens are stocks that are encrypted on the blockchain network. Investors hold assets in the form of paying stocks, bonds or ownership rights.

The value of the underlying security is the anchor for the value of the equivalent security token. If the value of the underlying security increases, the price of the security token also increases and vice versa. Initial Exchange Offerings (IEO) or Security Token Offerings (STO) are two common methods of issuing security tokens.

Utility tokens

Utility tokens provide holders with utilities related to current or future projects. ICO (Initial Coin Offering) rounds are usually when Utility tokens are released to users.

Utility tokens are often used by companies and project owners as a method of attracting people’s attention and interest in the company’s services and products, and at the same time being applied and creating a lot of value in business. blockchain ecosystem services.

Unlike security tokens, utility tokens do not provide holders with shares of the company. These tokens are not regulated by the law, so they often create lucrative loopholes for scammers or ghost projects, in which case these tokens have no value, and even bring a lot of damage to investors. invest.

Should or not invest in Altcoin?

Experts have commented that if bitcoin’s speculative opportunities are huge, altcoins are even more so. Owning a large capitalization makes profits from Bitcoin not easy to multiply tenfold in a short period of time, but Altcoin can do it.

However, you should not rush to make a decision. To know whether to invest in altcoins or not, you need to clearly understand the advantages and disadvantages of this cryptocurrency. So what are the advantages and disadvantages of Altcoin?

Advantage

• Overcoming the disadvantages of Bitcoin : Because it is an early electronic currency, Bitcoin cannot avoid encountering many problems. Altcoin’s “late birth” allows it to overcome Bitcoin’s previous disadvantages such as cheaper transaction fees, faster transaction speed or high applicability.
• Diversify your investment portfolio : The emergence of Altcoins gives investors many new choices besides Bitcoin. Just choose some potential Altcoins and you can earn a profit in the future.
• Potential investment channel : Altcoin possesses great speculative potential, can even multiply many times compared to its original value in a short time. Therefore, it is not natural that this is considered a potential investment channel that brings great profits to investors.

Defect

Risk of ICO fraud

Bloomberg research has proven that more than 80% of ICOs are scams and this type of scam is also said to be the most common form of fraud in the cryptocurrency market. New Altcoins are launched at very cheap prices, so they have great profit opportunities and attract new investors, which will be a lucrative bait for scammers to take advantage of.

Many ICOs are launched with only a project team with zero experience and knowledge in this field. Typical examples include Ifan and Pincoin, Startup companies from Dubai and Singapore based in Vietnam that tricked about 32,000 investors into buying Tokens and caused losses of up to 660 million dollars.

Pump and Dump

Sharks often use Pump and Dump to manipulate the market, many investors pour large amounts of money into low-value Altcoins to push prices up. When prices rise, they sell to make a big profit, which pulls in the confidence of many people and causes them to do the same.

Price fluctuates strongly:

There are a fair number of Altcoins that are highly volatile and a few of them have very short lifespans. However, it cannot be denied that there are still Altcoins with persistent growth such as Binance, Dogecoin or Ethereum.

What is the golden time for the Altcoin market?

If you have decided to enter the Altcoin market, you need to know what Altcoin season is and how to determine Altcoin season.

What is Altcoin Season?

The golden time for Altcoin investors is often called Altcoin season or Altcoin Season. So what is altcoin season?

That was the time when Altcoins simultaneously increased in price so much that profits doubled or tripled, even tenfold in a few weeks. The most typical is the Altcoin season in September 2017, just by buying a certain cryptocurrency during this time, investors’ assets will increase rapidly.

Signs that Altcoin season is coming

Accurately predicting when the Altcoin season will start will help investors seize the opportunity to earn many times the value of their assets.

A large number of Altcoins have hit the bottom of the cycle: Any virtual currency operates in a cyclical trend. After hitting the bottom, the next trend is to start an uptrend. Combined with other market factors, the bottoming of Altcoin signals that the next trend will be for prices to return to the highest level, or even set more record levels.

Bitcoin creates a bottom: Although there are many Altcoins that came after it, Bitcoin still dominates more than 60% of the market. That’s why it plays a decisive role in the Altcoin cycle. The perfect sign for an Altcoin season to begin is when Bitcoin bottoms and begins to grow again. At this point, most investors will want to hold Bitcoin and trade more with Altcoins.

Bitcoin Dominance: this is the term to refer to the “dominance” of Bitcoin in the market. When Bitcoin’s dominance gradually weakens, it will be a great sign for the rise of Altcoin. The lower this index, the more capitalization Altcoin is taking up, or in other words, Altcoin season is coming.

Crypto asset market increases: Besides Bitcoin Dominance decreasing, the total market value increasing at the same time is also a warning that Altcoin is about to enter historic breakouts.

Other signs: In addition to the signs mentioned above, you should also pay attention to factors such as technological initiatives, economic situation, social information updates or general psychology of investors. investment to evaluate the growth potential of Altcoin.

Effective Altcoin investment strategy

Many analysts have discovered similarities between the current cryptocurrency market and the 2000 dotcom bubble, thereby drawing effective investment strategies for the Altcoin market.

Strategy 01 – Invest in Altcoin while in the ICO phase

The ICO period is when traders can buy Altcoins at the lowest price, this will be the right time for you to start with the Altcoin path of your choice. After the ICO period ends, the coin is likely to increase dramatically and then suddenly decrease sharply. Therefore, as soon as the market shows signs of growth, traders should sell, potentially earning two to three times the initial purchase price.

If you invest in Altcoin during the ICO stage but the market does not tend to increase dramatically, you should switch to setting a specific target for the profit achieved. For example, double or half the profit and sell as soon as the desired level is reached.

One of the notes for successful Altcoin investing is to never put all your money into a single ICO.

Strategy 02 – Skip the period when other investors compete to buy during ICO

After the ICO period, the time the coin has passed its peak and begins to reverse is also the appropriate time for traders to buy. If this strategy is successful, it will bring big profits, and the purchase price may even be cheaper than the ICO stage.

For the price of an Altcoin to start going down depends on many factors, such as the previous buyer or the person receiving the coin reward dumping the coin to serve a certain purpose.

Strategy 03 – Wait for the time when the first up and down cycle of Altcoin has passed

Another investment strategy that is equally effective and used by many investors is to wait for the currency to experience its first sudden increase or decrease.

This method needs to be applied in combination with chart analysis, tracking price movements, comparing indicators and recognizing basic technical signals or charts. Although this strategy seems complicated and requires more in-depth knowledge, it also helps reduce risks a lot.

In addition to applying a suitable trading strategy, traders also need to prepare capital, make an investment plan and determine the time of Altcoin season.

Top 10 potential Altcoins that investors need to pay attention to

Namecoin (NMC)

Namecoin is among the first notable Altcoins, this currency has many similarities with Bitcoin because it was developed based on Bitcoin’s code and has the same maximum supply of 21 million coins.

Ethereum (ETH)

ETH is the coin of the Ethereum blockchain. The DeFi boom opened the door to thousands of decentralized applications (Dapps) built on Ethereum, leading to an increase in the value of ETH because every transaction requires ETH as a gas fee.

ETH is second only to Bitcoin in market capitalization and is favored for its high security. However, the disadvantage of ETH is that its transaction times are relatively slow and it is easily negatively affected by the growing competition in the cryptocurrency market..

Cardano (ADA)

Cardano (ADA) is an open source and decentralized blockchain platform that uses a Proof-of-stake consensus mechanism. The ADA development team aims to build the Cardano network as a 3.0 blockchain that overcomes many of the disadvantages of Blockchain 2.0, with faster transaction speeds, less energy consumption and helps blockchains interact with each other better.

Binance Coin (BNB)

Binance Coin (BNB) seems to be familiar to investors and people interested in cryptocurrency. BNB is not only an exchange coin but also a coin of the Binance Chain and Binance Smart Chain ecosystems.

The founder of Binance Coin is Changpeng Zhao (CZ), one of the most influential people in the cryptocurrency market and has provided many effective development directions for Binance Coin (BNB).

As of now, BNB’s market capitalization is second only to BTC, ETH, and ADA. This is considered an Altcoin with growth potential in the future as it has a stable value and fast growth rate.

Solana (SOL)

Built on blockchain 3.0 with a new consensus mechanism, Solana integrates many technologies providing super fast scalability up to 700,000 TPS. Solana allows you to send or receive money almost instantly at extremely low costs.

Litecoin (LTC)

Litecoin (LTC) shows that its outstanding point is that its transaction processing speed is four times faster than Bitcoin. While Bitcoin takes up to 10 minutes to close blocks, Litecoin only takes about 2.5 minutes. Besides, Litecoin’s transaction fees are also quite low and it is more stable than Bitcoin because it is based on the Scrypt consensus algorithm.

Bitcoin Cash (BCH)

BCH has a market capitalization of $7.7 billion. This is an Altcoin with relatively low transaction fees and higher transfer times than Bitcoin. Additionally, Bitcoin Cash has its own Blockchain technology and implements an improved block size of 8MB instead of Bitcoin’s block size. Setting a size limit can increase transaction fees while reducing transaction speeds.

However, Bitcoin Cash has quite a few trading pairs compared to Bitcoin, so investors will be more limited in trading. Distinguishing between Bitcoin and Bitcoin Cash is also an issue that prevents investors from learning about these two currencies.

Ripple (XRP)

Ripple was built as both a digital currency and a platform that streamlines international payments. Ripple is second only to Bitcoin and Ethereum in terms of market capitalization and totals $18 billion.

Ripple is highly secure and has several features that contrast with traditional banking services. The disadvantage of XRP is that the number of releases depends on the developers. Besides, this Altcoin is also vulnerable to access code attacks.

Tether (USDT)

Considered one of the most stable coins in the cryptocurrency market, each Tether token is pegged to 1 USD due to providing a stable position for depositing traders.

The most obvious advantage of USDT is that it is widely used, so it brings peace of mind to traders at all levels during the volatile period of cryptocurrency. Tether’s most recently launched feature is the periodic issuance of accounts, thanks to which each USD is backed by a real USD in their account.

Besides its advantages, Tether still has disadvantages such as instability in operation and lack of security. This caused Tether to be attacked and lose the trust of investors.

USD Coin (USDC)

USD Coin is a stablecoin pegged to the US dollar. Center, a consortium that includes Coinbase Global, Inc. (NASDAQ: COIN) is the owner of the USDC coin.

Hopefully through the above article, you have understood what Altcoin is. Altcoins are late-born children compared to Bitcoin, which is why this currency overcomes many of Bitcoin’s disadvantages. However, it cannot be denied that Altcoin still has some problems. If you are interested and want to venture into the Altcoin market, you need to choose a potential coin and clearly understand the rules of this “game”.