Take a look at the state of the crypto industry and one thing quickly stands out; Bitcoin reigns supreme. In terms of market cap, value per token, and sheer popularity, it is clearly leading the pack. In fact, it was declared the best-performing asset of the 2010s, even beating out gold. With all of these benefits, one might wonder if there is any point in investing in altcoins.
Altcoins, for the uninitiated, refers to any crypto token that is not Bitcoin. In this article, we’ll break down why altcoins are a worthy investment.
The Benefits of Altcoin Investment
Even though Bitcoin reigns supreme, altcoins are not exactly lagging behind. When it comes to crypto to buy today, many investors are looking at up-and-coming altcoins as opposed to more established coins like Bitcoin and Ethereum. As Michael Graw writes, altcoins like Stacks (STX) and Sui (SUI) are picking up momentum. By investing in these lesser-known cryptos, you gain several benefits, such as:
Diversification
One of the golden rules of investment is to not put all of your eggs in one basket. As much as Bitcoin is the most valuable crypto, it has seen periods of market decline. If you only invest in it, you could go months or even years without significant profit. But if you invest in a variety of altcoins, at least one should perform well at any given time. Diversification is especially important because of how volatile the crypto sector is known to be.
So, as a rule, make sure your funds are split across several cryptos with high growth potential. If one encounters a market slump, you can focus on the others. And if one or more of your tokens completely tanks, you haven’t lost all of your money. In the best-case scenario, you will have multiple streams of income from the various altcoins you’ve invested in.
Market Performance
Looking at the crypto sector, it is easy to think that Bitcoin is the only token that performs well. And while it is the biggest token by market cap, there are assets reporting growth rates that blow it out of the water. Looking at the altcoin space, especially newly launched tokens, you’ll see crypto that has 100x growth upon launch.
If you put $1,000 in Bitcoin and $1,000 of a new token that ends up being a runaway success, the latter might actually net you bigger profits. The reason for this is that Bitcoin is so big that the level of relative growth it can see is limited. A new altcoin might see its price grow by 100% in a few weeks but Bitcoin is less likely to. So, investing in altcoins comes with the added benefit of granting access to impressive market performance.
Access to Unique Projects
Altcoins are also impressive because many are attached to interesting blockchain projects. In the last few years, we’ve seen blockchain projects of every niche emerge to great success. We’ve seen the rise of gaming, including play-to-earn projects with native tokens. We’ve seen NFT projects, environmental enterprises, and many more. If you were to invest only in Bitcoin, the only projects you would be able to directly access would be the Bitcoin network.
With altcoins, you have access to a whole world of projects, along with the communities and features they come with. This is especially important if you are interested in blockchain and crypto beyond just making money.
Additional Benefits
Cryptos are very dynamic, meaning the features one has might be absent in another. One reason you should be investing in altcoins is to have access to unique features. For example, Bitcoin is based on a proof-of-work consensus, meaning it cannot be staked and uses a lot of energy. By using an altcoin based on a proof-of-stake consensus, you can earn interest on your funds and do better for the environment.
Certain altcoins are known to have faster speeds and more security than Bitcoin, as well as other features. While Bitcoin has its benefits, you rob yourself of a world of unique crypto features if you exclude altcoins from your investment portfolio. One thing to do would be to research the possible features that crypto might have that you’d want access to and then seek out altcoins that come with these.