What are altcoins & should you invest?
Bitcoin is the first cryptocurrency, but far from the only one. Everything that appeared after it is called altcoins (from alternative coins). Ethereum, Solana, Toncoin, Dogecoin, and thousands of others are all altcoins. This article discusses what they are, why they are needed, and whether you should invest money in them.
What are altcoins in simple terms?
Altcoins are all cryptocurrencies except Bitcoin. They try to solve Bitcoin's problems or offer something new. Bitcoin is slow (10-60 minutes per transaction) and expensive (fees can run into tens of dollars). Bitcoin's main goal is to be digital gold, a store of value. Altcoins offer speed, cheap transfers, smart contracts, privacy, and other features.
They first appeared in 2011 when the first Bitcoin forks were created. But the real altcoin boom happened in 2017, when thousands of projects raised billions of dollars through ICOs. Now there are tens of thousands of them, but 90% are junk.
Types of Altcoins
Smart contract platforms — Ethereum, Solana, BNB Chain. The most important and reliable class. Decentralized applications are built on them, NFTs are issued, and token sales are conducted.
Stablecoins — USDT, USDC, DAI. Pegged to the dollar. They don't increase in price but also don't fall. Needed to lock in profits without converting to fiat.
Private coins — Monero (XMR). Transactions are untraceable. No one will know who you sent money to or how much.
Memecoins — Dogecoin, Shiba Inu, and endless new ones. Created for a joke or hype. They rise on news and Elon Musk's tweets, and fall just as quickly. Usually junk.
Coins for specific tasks — Toncoin (Telegram ecosystem), Chainlink (oracles for DeFi), Uniswap (decentralized exchange). Each has its own niche.
Why Altcoins Rise and Fall More Than Bitcoin
The altcoin market is 10 times smaller than Bitcoin's. Less money is needed to move the price. So when money comes in, altcoins soar by hundreds of percent. When money leaves, they fall by 90% or more.
The correlation with Bitcoin is very strong. When Bitcoin rises, altcoins usually rise even more. When Bitcoin falls, altcoins fall even more. Many altcoins live for a few years and then die. Of the top 20 by market capitalization in 2017, only 3-4 are still alive today.
Should You Invest in Altcoins?
Short answer: yes, but wisely and with a small portion of your capital. The long answer depends on your strategy.
For a long-term investor (3-5 years). Bitcoin and Ethereum are the base. 70-80% of the portfolio should be in them. The rest can be distributed among 3-5 top altcoins from the top twenty by market capitalization. Future leaders may emerge among them. For example, Solana (speed and low cost), Toncoin (Telegram ecosystem), Chainlink (key DeFi infrastructure). Don't chase hundreds of percent in a month. The goal is to survive a bear cycle and be in profit in 3-5 years.
For a speculator (medium-term trades). Altcoins are the primary tool. High volatility provides opportunities. High risks. Rules: invest time in research, not just money; set stop-losses (automatic sale if fallen by 10-15%); lock in profits (don't try to catch the top); don't use leverage (borrowed funds on altcoins will kill you quickly).
For a beginner who doesn't understand anything. Start with Bitcoin and Ethereum. Understanding these two is 80% of success. Don't touch altcoins until you understand the fundamentals: why the project is needed, who the team is, what the market capitalization is, how it differs from competitors. And that takes time.
Undiscussed Risks of Altcoins
A project can die. The team left, development stopped, money ran out. The coin falls 99%, and it's permanent. Hackers can breach a smart contract and steal all the money. This has happened with bridges, exchanges, and applications (Ronin, Poly Network, Nomad). There's a risk of regulators. The SEC could declare a coin a security, leading to delisting from exchanges. The price would collapse overnight. Developers might fork or release a new version, rendering the old token useless.
How to Distinguish Junk from Potentially Interesting Altcoins
Check if there's a whitepaper and real documentation. GitHub with active development is a good sign. If there haven't been commits for six months, the project is dead. Is the team public and well-known? Anonymous founders are a red flag. Hundreds of millions of dollars in trading volume on major exchanges (Binance, Bybit, OKX) — the project is alive. Only DEX and a couple of listings on CoinMarketCap — it's junk.
Conclusion: A Smart Strategy for Beginners
Altcoins are a tool for high returns, but with high risks. There are no guarantees. Many coins will die. But some will grow 10-100 times.
A smart strategy for beginners: 70% of the portfolio in Bitcoin and Ethereum, 20% in the top 3 altcoins by market capitalization (check at the time of reading – Solana, BNB, Toncoin, or XRP), 10% for speculation after thorough research. Store everything in your own wallet. Write down your seed phrase on paper. Don't invest your last money. And remember: if you don't know what you're doing, stick to Bitcoin. It's harder to lose everything on it than on another dog-themed memecoin.
Our Services for Streamers
Our Services for Content Creators
