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Will Altcoins make you Rich?

by Marcus 4 months ago in investing · updated about a month ago
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Cryptocurrency explained

Photo by DS stories from Pexels

Founded back in 2009, Bitcoin established its reputation at the top well before any other types of coins were minted on the blockchain. That left other coins, known as “altcoins,” to get in line.

Bitcoin makes up more than 40% of the total crypto market cap at the time of writing this article, and Ethereum makes up ​​more than 20%. Altcoins occupy the remaining market share (roughly 40%).

Below will give you an idea of the market cap of Bitcoin in comparison to Ethereum and other altcoins.

Source: Coinmarketcap

What Are Altcoins?

According to Investopedia simply means cryptocurrencies other than Bitcoin.

Altcoin is shorthand for “alternative coins”

Examples include Ethereum, Stellar Lumen, Cardona, XRP, Polkadot, Litecoin and others

They share characteristics with Bitcoin but are also different in other ways. For example, some altcoins use a different consensus mechanism to produce blocks or validate transactions. Or they distinguish themselves from Bitcoin by providing new or additional capabilities, such as

  • smart contracts or
  • low price volatility.

Should You Invest In Altcoins?

Experts caution that Bitcoin is highly speculative, and altcoins are even more so. Ethereum, the most widely heard-about altcoin, has grown significantly since its 2015 launch, thanks to its smart contract capabilities and the popularity of digitally scarce art known as non-fungible tokens (NFTs).

The thing about Altcoin

Most people invest in altcoin because they believe it will go to the moon. And maybe it will. But it's pretty hard to predict which one will. There are over 7,000 over crypto to date. Perhaps you can narrow it down by focusing on the top 20 or top 50 cryptocurrencies.

Some things to consider:

  • Don’t view crypto as a get rich quick scheme.
  • Before you actually invest in smaller altcoins like Tether, Cardano, and others, start by learning about how they work.

President Joe Biden signed a $1.2 trillion bipartisan infrastructure bill on Nov. 15 and it includes some new legislation crypto investors should know about.

The new law will require brokers aka cryptocurrency exchanges to issue a 1099-B. In other words, crypto exchanges will now be required to notify the IRS directly of crypto transactions.

What should you do?

Most experts would recommend most investors keep their crypto holdings to under 5% of their portfolio and stick with the two most well-established coins which are Bitcoin and Ethereum. And that’s only if you’ve already built an emergency fund and know crypto investments won’t get in the way of long-term goals like paying down high-interest debt and investing in low-cost index funds.

Conclusion

It's important to do your due diligence before buying any cryptocurrency. Never let the fear of missing out(FOMO) cripple you from making a wise informed decision. Having a healthy scepticism is important as with any investment cryptocurrency or otherwise.

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About the author

Marcus

Entrepreneur, Youtuber, Fencer

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