What Are Altcoins and Should You Invest In Them?

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ALTCOINS ARE ANY cryptocurrency that aren't Bitcoin.

These coins were created after Bitcoin and often present themselves as better alternatives to the premier cryptocurrency. Altcoins make up nearly 40% of the total cryptocurrency market, according to CoinMarketCap.

"With more than 5,000 altcoins out there, it is safe to say that most of them will never be able to materialize into anything useful or provide substantial returns in the long term," says Ben Weiss, chief operating officer of CoinFlip. "Of course, there are many promising altcoins out there that help facilitate new and exciting advances in blockchain technology like Ether and Chainlink, both of which strive to bridge the gap between blockchain tech and real-world applications."

That said, altcoins are incredibly risky investments. You may be more likely to lose than win on an investment if you don't do adequate research. Before you consider putting your hard-earned savings at risk by investing in altcoins, make sure you understand the risks and know just what you're getting into.

Should You Invest In Altcoins?

Cryptocurrencies have a certain allure as investments.

"Altcoins offer an opportunity in that they have a much higher upside in terms of percentage gain," Weiss says. "On the other hand, they also have a much higher risk."

He points to Dogecoin as an example. The cryptocurrency took off in value in late January 2021 seemingly for no reason other than people started buying it, causing the altcoin to go viral. Such investments can fall out of favor as quickly as they fall into it.

"There is a saying that time in the market beats timing the market, meaning timing trades is difficult," he says. It's better to invest in something you believe in for the long run than hop along for the ride on something experiencing sudden popularity because you risk losing a lot when a pullback inevitably happens.

 

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