What is Altcoin: The journey to explore cryptocurrencies other than Bitcoin

Starting with Basic Concepts

When entering the world of cryptocurrencies, you will constantly hear unfamiliar terms. One of the keywords that every trader needs to understand is “altcoin” – short for “alternative coin.” Unlike Bitcoin, the first and largest cryptocurrency, altcoins include all other digital assets within the blockchain ecosystem.

What is an altcoin? Simply put, it is any cryptocurrency that is not Bitcoin. Since Bitcoin’s inception, thousands of other projects have been built to solve specific problems or offer unique features. However, it is noteworthy that some believe Ethereum – the second-largest foundational project – should also be considered a more special type of cryptocurrency rather than a regular altcoin.

Whether there is controversy or not, the term altcoin today encompasses nearly all token projects outside of Bitcoin. From Ethereum with smart contract technology to utility tokens and stablecoins, all are classified under this common name.

The Explosive Growth of the Altcoin Market

Before Ethereum, altcoins were mainly created in two ways: copying source code from Bitcoin (fork) or building a completely new blockchain from scratch. This process is complex, costly, and not everyone can do it.

Ethereum changed everything. This platform introduced new token models, allowing any developer to create their own token with just a few lines of code. This opened a shortcut, resulting in an explosion of new projects and tokens.

Today, the number of available altcoins is in the tens of thousands, although only a small fraction of these are active projects. The rest have disappeared due to weakness or abandonment. This is also why investors must be cautious and conduct thorough research before making choices.

Types of Altcoins: Many Kinds, Many Purposes

Utility Tokens

This type of altcoin is designed to provide practical services within a specific network. Utility tokens can allow users to purchase storage space, receive transaction discounts, vote on the project’s future, or perform other actions. As long as the token represents a way to achieve something within the system, it is considered a utility token.

Governance Tokens

These tokens represent decentralization. Holders of governance tokens have voting rights on important project decisions – from budget allocation to technical upgrades. Without centralized leadership, only the community decides.

Memecoin

Memecoin started as a joke. Dogecoin (DOGE) was created in 2013 and is considered just a fun meme with no real value. Many predicted it would die after a few weeks. But surprisingly – it didn’t. Instead, Dogecoin built a strong loyal community and has been growing annually.

Following Dogecoin’s success, many other memecoins emerged on blockchains like Solana and new standards like BRC-20. Although they lack practical utility, memecoins attract community and internet culture.

Stablecoin

Not all altcoins are highly volatile. Stablecoins are pegged to assets with fixed value, usually the US dollar. Major stablecoins like USDT or USDC are designed to maintain a $1 value, providing investors a safe haven when they want to avoid volatility.

Privacy Coin

This is a type of altcoin that was once popular but now has been restricted. They enable anonymous transactions, contrasting with the transparency of public blockchains. Regulators worry they can support illegal activities, so most major exchanges have removed them.

Advantages and Risks: Two Sides of the Same Coin

Strengths

Altcoins offer innovative solutions that Bitcoin cannot provide. Many have rich utilities – from access to unique networks, to earning opportunities through staking, lending, or governance participation. These utilities help altcoins survive and grow long-term.

Challenges

However, trading altcoins also involves significant risks.

High volatility: Bitcoin accounts for about 53% of the total cryptocurrency market capitalization (currently around $1.2 trillion out of $2.25 trillion). This means altcoins often experience more dramatic price swings, making them riskier than Bitcoin.

Low liquidity: Some altcoins have fewer traders and less activity, especially those with small market caps. Ethereum can be traded easily, but some other coins often face liquidity issues.

Fraud risks: The crypto industry attracts scammers. They hype projects, promise huge profits, attract investors, take their money, then run – called “rug pull.” Detecting these scams can be difficult without experience.

Poor projects: Not necessarily scams, but some altcoins are truly weak projects. If they fail to attract attention, they will eventually lose value or disappear completely.

Altcoin Trading Strategies: Smart Approaches

Full HODL Strategy

Some investors choose a simple approach: find an altcoin they trust, invest, lock it in their wallet, and forget about it. Regardless of market movements, they hold in hope that the price will rise someday. This strategy works well with Bitcoin, but carries higher risks with altcoins.

Diversification

A safer approach is risk spreading. Instead of putting all your money into one altcoin, select 5-10 projects with different potentials. Based on technology, goals, popularity, or other factors. This helps minimize losses if one project fails.

Active Trading

Sometimes, you don’t just sit and wait. Some traders buy altcoins to sell back after a few days, weeks, or even hours, hoping to sell at a higher price. This is active trading – requiring skills, experience, and good market monitoring.

Practical Tips for Altcoin Investors

If you plan to enter the altcoin world, keep these points in mind:

• Research thoroughly before investing. Understand the project, development team, goals, and technology.

• Understand the market – how news, events, or regulations affect altcoin prices.

• Always remember that the crypto market is extremely volatile. Prices can increase tenfold or plummet within hours.

• Use a private wallet to store your altcoins – called “self-custody.” It’s the safest way to protect your assets.

• Maintain discipline and avoid emotional decisions – fear can cause you to sell at a loss, greed can lead to buying high.

• Start with small amounts you can afford to lose entirely. Never trade with money you cannot afford to lose.

• Learn risk management – use stop-loss orders to limit losses and take-profit orders to secure gains.

• Beware of suspicious ICOs – early coin offerings are often hiding scams.

• Don’t forget about taxes – profits from trading altcoins may be subject to taxation according to your country’s laws.