Are you new to cryptocurrency? Or do you want to experience crypto trading?
If you are a beginner who wants to start small, cryptocurrency giants like Bitcoin may not be suitable.
Since the birth of Bitcoin in 2009, a plethora of Bitcoin-inspired alternative coins with promising features have emerged. Choosing from thousands of options can be overwhelming. There are also scammers in the cryptocurrency market, and putting your money in the wrong altcoin might be possible.
Who wouldn’t want to own cryptocurrency that will make you wealthy? It’s every investor’s dream. However, choosing the right alternative coin for you can be challenging.
Before we discuss the tips on how to choose the appropriate altcoins for you, let us first define what an alternative coin is.
Alternative coins
If you are already familiar with the first cryptocurrency – the Bitcoin, then perhaps you might have already heard about alternative coins.
Alternative coins are simply digital currencies that are not Bitcoin. The reason why they are called altcoins is that they serve as a substitute to Bitcoin and fiat currency.
The very first alternative coin was introduced in 2011, and now, there are more than 10,000 altcoins out there. Early altcoins are Bitcoin-based. However, they were created with features to improve aspects of Bitcoin – fast and energy-efficient transactions. Other altcoins were designed for a variety of purposes.
Altcoins have always been part of the crypto market. Therefore, it is important to know what they are and how they work.
Choosing the right altcoin for you
There are no two altcoins alike. Each of them is unique in its own way. Here are some tips on how to discern winners vs losers.
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1. Conduct thorough research.
Experts and consultants can provide you with assistance in choosing the right altcoin based on your needs. You can also talk to an altcoin company itself. However, do not be easily swayed with marketing strategies and talks. You also need to do your own research prior to consultation.
One of the best places to look for is the history of the altcoin itself, so you will have an idea or background on how that specific altcoin performed over time.
In addition, you must look for charts and pay attention to every detail, which includes market capitalization and circulation. Though the price is important, it might not be a deal-breaker after all.
2. You must consider their underlying technology.
Most alternative coins are Bitcoin-based. Although most of them promise to have more improved technology, some of these coins are just mere replicas of Bitcoin. These coins end up being the last on the list and often unnoticed.
The good news is that there are alternative altcoins out there that are designed to supplement the features that Bitcoin does not have. In addition, they also give solutions to problems that Bitcoin can’t address.
As a result, they end up coexisting with Bitcoin instead of being rivals. One example of this alternative coin is Ethereum.
So when choosing an altcoin, it is important to know its underlying technology. Stay out of altcoins that have the ability to disrupt financial industries. Most altcoins are weak and won’t survive market crashes. For instance, in the year 2018, a lot of wannabe coins were drowned when the market crashed simply because they didn’t have strong technologies.
3. Get to know the team behind the altcoin.
When choosing a cryptocurrency, it is necessary to get to know the team behind it. A team can either destroy or build a business. Even if the technology is far superior to the others, if it doesn’t have a strong and visionary team, it might not succeed.
When looking at a team, there are things that you must consider. The first is how impressive the team is. So you have the same vision as cryptocurrency?
You might also want to do a background check on the founders of your chosen altcoin. Do they have the right mindset to create a successful and winning altcoin?
Lastly, you should also check the community that surrounds it. Is the community active on social media platforms?
4. Check the volume of daily trades.
It is a must that you check the number of people using or trading on the chosen altcoin. If there are only a few, then the volume of trades will be below. This only means that the specific altcoin may not be that popular. There are online apps like CoinMarketCap or Coindesk that you can use to check the daily trade volume.
But you must also be careful. Not all cryptocurrencies with high popularity have a good trade volume. Some unpopular or smaller cryptos have higher trade volumes as compared to the large ones.
If an altcoin has high trade volume, it can assure you that people will buy your coins whenever you need to sell them.
5. Diversify your risk
Spreading your risk is one of the strategies in crypto investment. You should not invest in a single cryptocurrency. Diversify your risk by trying out others to strengthen your portfolio so that in the event of failure, you might still be able to fall back on other reserved coins.
Experts also recommend investing in stablecoins which are known for stability compared to other cryptos. Stablecoins are backed by fiat money, so there is no need for you to worry about volatility.
Conclusion
With over a thousand alternative coins available in the market, it is really a struggle, especially for beginners, to choose one. However, following these recommendations might be able to help you succeed and minimize the risk.
To summarize it all, it is recommended that you must research thoroughly, get to know the team behind the cryptocurrency, consider their underlying technology, check the volume trades and finally, minimize your risk by investing in more than one or diversifying your portfolio.
At the end of the day, just like any other investment, you must not miss the fact that cryptocurrency is a highly volatile investment. So invest at your own risk.
