Best Altcoins to Invest
What Are the Best Altcoins to Invest?
What are the best altcoins to invest in? Digital currencies are gradually becoming mainstream even at the state level, they have the potential to change society as we know it. China is already experimenting with the digital yuan, and these experiments seem to be very successful. Cryptocurrency adherents believe that digital money will be accepted for circulation in increasing volumes at all levels of the market, thereby increasing the value of digital assets.
Giants such as PayPal not only accept cryptocurrency, but also continue, like VISA, to actively develop this direction. In addition, Tesla and Square have made significant investments in Bitcoin, which gives the status of cryptocurrencies a lot of confidence and resilience.
With more and more institutional investors starting to invest in cryptocurrencies, investing in crypto now looks like a smart and cutting edge way.
Old-timers of the market believe that it is never too late to invest in cryptocurrency.Investing now has the potential to make some good money as cryptocurrencies become more widespread and at relatively low cost levels. If the price of bitcoin continues to rise, as most experts predict, investing now can be very profitable. However, this “if” is where the main risks associated with investing in cryptocurrencies lie.
The riskiest aspect of cryptocurrencies is their high volatility. We are now in uncharted territory, and no one knows whether the cryptocurrency will eventually become a full-fledged financial instrument or not. Currently, most of the businesses in the world do not accept cryptocurrency as payment. Although every day the number of companies entering into the circulation of cryptocurrencies is growing. In addition, traditional investment funds are allocating an increasing proportion of their investment portfolios to cryptocurrencies. But no matter how popular cryptocurrencies become among large investors, they will not be able to succeed in the future if they are not accepted by the masses.
Nevertheless, despite the volatility and the not quite official status of digital assets, the crypto industry continues to develop, and tools improve, which, of course, inspires optimism. In the short term, we are likely to see an increase in the investment trend in crypto assets from large investors, and in the long term, mass adoption, which will be accompanied by the emergence of new tools at the border of digital and traditional finance.In addition to volatility, there are also risks associated with the acquisition and ownership of cryptocurrencies.
The purchase of cryptocurrencies is associated with new tools for society, for example, the purchase of coins through a crypto exchange, rather than a traditional stock exchange. For storage, you will need a special digital wallet. For an inexperienced investor, this can pose a security risk if the proper measures are not taken.
Is cryptocurrency a smart investment? It depends on many factors: the investment period, investment goals and expectations, the size and composition of the investment portfolio.
Think about how you would react if your crypto investments fell by 35% overnight, as happened recently with bitcoin. On the other hand, if you have money to spare and are consciously willing to take on risk, adding cryptocurrencies to your investment portfolio might be a good move. It is recommended to invest only the money that you can afford to lose.
The first thing to think about is the proportions in which to correlate fiat money and cryptocurrencies, that is, the overall balance. Conservative financiers believe that the maximum share in the entire investment portfolio, cryptocurrencies can take no more than 10%. More modern experts give cryptocurrencies a share of up to 50%. Of course, the proportions between cryptocurrencies and fiat money can be different.
The main thing to understand is that if something goes wrong, the investor should not lose all his savings.
It is also worth carefully approaching the formation of the cryptocurrency part of the investment portfolio. Bitcoin is by far the most popular cryptocurrency, but it is not the only option. The rates of some altcoins are growing faster, but they are also more prone to volatility and mostly depend on the bitcoin rate, although this dependence is gradually weakening.
What Altcoins to Invest in?
In a broad sense, altcoins are any digital assets, with the exception of Bitcoin. All this great variety can be divided into the following categories:
Cryptocurrencies, in turn, differ from each other in technical characteristics:
internal functions (for example, support for smart contracts, mechanisms for increasing anonymity, etc.).
Many cryptocurrencies look like radically different assets. For example, Litecoin (LTC) and Ethereum (ETH). But there are also almost identical projects, differing, perhaps, only in the name. Such “alternative coins” are created as clones of existing cryptocurrencies - but with minor changes. Examples include Dogecoin (DOGE) and Shiba Inu (SHIB). It's funny, but Dogecoin is based on Litecoin. And the latter, in fact, is a clone of bitcoin.
Stablecoins are designed not so much for investment, but for savings during periods of extreme market volatility. After all, “stable coins” are cryptocurrencies that have a hard peg to some other asset: gold, the US dollar, another virtual currency, or a basket of monetary units. Due to this, their exchange rate is more stable and rarely deviates by more than 5-10% from the base value. But ordinary digital currencies can both fall in price by 10 times, and grow just as significantly.
The third class of virtual assets is represented by tokens. If cryptocurrencies play the role of money in the blockchain world, tokens act as securities or corporate rights. Depending on the type, they can provide the holder with voting rights, allow you to receive a part of the project's profits or buy internal services.
What Is the Best Way to Invest in Altcoins?
What are the best altcoins to invest in? What is the best way to invest in altcoins? How to assess the prospects of an altcoin?
From the point of view of profit, the analysis of the prospects of investing in alternative coins should be approached from different angles:
explore options for using the digital asset;
collect information about developers;
understand how interesting the project is for other investors.
In fact, the analysis is necessary to answer the main question: is a particular asset overvalued or undervalued? The former should be avoided and the latter should be invested in.
How to analyze a seemingly promising altcoin? Let's discuss this topic in more detail.
Studying information about the project
The first thing to do is to read the White Paper of the project. Reading this document will
help you understand:
How is it planned to use cryptocurrency?
How will the project develop?
What are the developers ready to do?
After studying the technical description of the altcoin, the investor must determine what value the project can offer the user. For example, Bitcoin is built on the idea of creating a decentralized electronic currency that can be transferred between users without intermediaries and control from the issuing center.
Estimating the balance of supply and demand is one of the most effective methods of "calculating" the prospects of an asset. Altcoin should have the potential to increase demand. This may be a unique feature of the project, or even the most banal - its deflationary model. When demand exceeds supply, the price rises. As a result, demand further increases.
The effectiveness of project development depends on the team of creators. The presence of profiles on LinkedIn, Twitter or Facebook suggests that the developers are public figures, open to suggestions from potential investors. After studying the biographies of key participants, it is necessary to understand:
Whether they have experience in other large projects and how successful this experience is;
Are they qualified enough in their field?
Whether they are known to the crypto community and what reputation they have earned.
The purpose of collecting information is to draw a reasonable conclusion about the level of knowledge and skills of developers and understand whether they can even launch and bring their project to life.
An example is the Ethereum cryptocurrency development team. Today, there are several competing projects: they not only offer similar functionality, but also have better
higher transaction speed;
However, most third-party developers still want to create new products on the Ethereum blockchain.
For example, the AAVE or OpenSea projects, many DeFi applications are based on Ethereum. The community appreciates the professionalism and openness of its creators. A strong and experienced team attracts additional talented programmers who create new products and improve old ones, which further increases the popularity of the “mother” cryptocurrency. Is it any wonder then that ETH is second only to bitcoin in demand?
What Altcoins to Choose?
Different circumstances can become drivers of growth or fall in the rate of altcoins: listing on crypto exchanges or even a post on social networks of idols of modern business, such as Elon Musk, can drastically change the place of a coin in the cryptocurrency rating. This happened with Dogecoin (DOGE), which immediately became the most discussed cryptocurrency in the media.
Ethereum (ETH), which immediately follows Bitcoin, has another huge advantage in the decentralized finance (DeFi) sector, where Ethereum is actively used as the underlying protocol. The DeFi industry has shown significant growth over the past year and is not going to stop.Some of the most famous DeFi solutions built on Ethereum are Uniswap (UNI) and SushiSwap (SUSHI), which facilitate decentralized exchanges and pooling of many digital assets.
However, there are a lot of rumors and versions around the prospects of the second largest cryptocurrency, the validity of which we will be able to check over time. Moreover, Ethereum has two interesting competing projects: Polkadot (DOT) and Cardano (ADA), currently ranked seventh and fifth in terms of capitalization, respectively, in the list of the largest cryptocurrencies in the world. The Polkadot startup is developing interesting solutions for the interaction and integration of different blockchains with each other, combining several specialized chains into a single universal network. Cardano is a general-purpose blockchain based on peer-reviewed academic research. These third-generation altcoins have shown decent growth over the past year, on par with ETH.
When choosing altcoins, the following criteria should be distinguished: coin value, capitalization, popularity, volatility, prospects. Based on these indicators, it is easier to make the right decision.
Why Is It Profitable to Invest in Crypto?
Profit comes first, of course. Cryptocurrencies are the most profitable asset class in the last 50 years.
The growth of capitalization and stability of cryptocurrencies is another reason worth paying attention to.Interest from institutional investors and the ever-increasing share of crypto assets in the portfolios of traditional investment companies are increasingly turning cryptocurrencies into full-fledged investment instruments, along with fiat assets and gold.
The development of the decentralized finance (DeFi) sector is another factor that speaks in favor of investing in cryptocurrencies. Fatigue with the inefficiency of the traditional financial system and the new opportunities provided by the blockchain make it possible to be optimistic about the future of De-Fi and financial instruments based on them.
Fluctuations in cryptocurrency rates do not directly depend on the volatility of traditional markets. So, when stocks, oil or gold fall, bitcoin can rise in price, and vice versa. In this regard, cryptocurrencies are often used as protective assets, a "safe haven" where you can wait out the storms in traditional markets. For this purpose, cryptocurrencies have taken strong places in the portfolios of large institutional investors: Square, MicroStrategy, Tesla and others.