How to Invest in Altcoins
It might seem like a new and dazzling endeavour, but investing in cryptocurrency is not that much different to trading on traditional currency exchanges. Your main concern is going to be security. Perhaps this is heightened due to how new and untested many cryptocurrencies are. We continue to see a large number of scams, hacks and lost funds in the crypto space, so it’s no wonder many newcomers may be hesitant about how to keep their investments safe in this new cyber world.
While it is still relatively unregulated, one aspect which could help ease minds is understanding and choosing which cryptocurrency you trade. Choosing one of the more secure currencies can mitigate many of the risks associated with trading cryptocurrencies. While Bitcoin and Ethereum are the biggest players in the market, there are many other options which can provide you security without discounting the potential reward.
Below we will explain what to look for when choosing your cryptocurrency, and why altcoins may be the best option for you. We will also help you identify the best altcoins in Australia.
Diversify your portfolio
You will be bombarded with offers and opportunities when you decide to start buying or selling cryptocurrency. But how do you choose the right one for you?
Well, it might be better to not pick one cryptocurrency but to ensure you hold a diversified crypto portfolio.
It’s easy to simply stick to the most popular options, such as Bitcoin or Ethereum. They are the two biggest cryptocurrencies in the world because they have the largest market capitalisation. Both are well-established and widely used throughout the crypto world, especially in the nascent industry of blockchain technology. Because they are so widely used, you will always be able to find buyers and sellers, as well as a broader community of users, miners and developers.
However, most users are investing in cryptocurrencies because they are looking for strong gains. Because of their market size, these two behemoths of the crypto world lack the volatility of newer entrants, such as altcoins. This means your risk is lower, but it also means your potential gains are severely dampened.
Investing in a variety of cryptocurrencies not only diversifies your portfolio, it also enables you to be more confident about market fluctuations. A diversified portfolio allows you to hedge your bets and enjoy massive spikes while cushioning the blow of any large losses.
What should I have in my portfolio?
You want a diversified portfolio that includes payment coins, smart contract platforms, stablecoins, DeFi tokens, Privacy coins and NFT coins. Because of their market size and popularity, investing in Bitcoin and Ethereum is a great start as it allows you to immediately get the ball rolling. We would also suggest adding some altcoins into the mix provides further hedging opportunities.
What are altcoins?
To put it simply, alternative coins, or altcoins, simply refer to all tokens and coins which are not Bitcoin or Ethereum. They are alternatives to the largest currencies in terms of market capitalisation and provide additional services which aren’t available for those two currencies. This includes voting privileges, known as governance tokens, or an alternative method of payment, known as utility tokens. Some altcoins are already widely popular in crypto markets, so while do provide innovative options, they are already being widely adopted by the broader community and will only continue to grow in popularity.
While altcoins do follow the price fluctuations of Bitcoin, there can be additional benefits to investing in these tokens with altcoins routinely seeing stronger gains and outperforming Bitcoin for a period of time. This means you can accelerate your investment earnings quickly and securely, especially if you invest in some of the best altcoins in Australia.
How to choose the best altcoin for you
With more than 17,000 altcoins on the market, there is definitely plenty of options out there! But how do you choose the right ones for you? There are a number of aspects to think about to help you identify the best altcoins for you. This does require a fair amount of research to help you understand the coin’s market capitalisation, use cases, team, road map and much more.
You should always investigate the market cap of any cryptocurrency as it provides indicators of stability and growth potential. After all, you don’t want to sink all your investment into something which is likely to tank at the first sign of nerves or will never really experience growth. How do you determine market cap, though? To put it simply, you just need to multiply the current price of a coin by the total number of coins in circulation. The higher the market cap, the safer the investment.
What is a ‘white paper’? It provides you with a detailed explanation of the coin’s prospectus. For example, it will answer what its purpose is – is the coin trying to solve a real problem, improve existing technology or create a new opportunity? Does it have any plans or roadmaps for where it is heading and how it plans to get there? Also, how does it work? This may seem highly technical, but understanding the purpose and future plans of each altcoin may help you decide whether it’s a worthy investment.
When we talk about use cases, we are identifying the need or purpose for the altcoin. Is this something that the people or market wants? Is it addressing a need or problem in the market? After all, the cryptocurrency began to take off because it provided people with the opportunity to be more independent and reduce their need for financial institutions. So it’s good to question, what is the use of the altcoin you are researching?
It’s always a good idea to look at competitors no matter what you are looking to invest or buy-in. After all, a lot of coins will have similar use cases, so you want to check them against their competitors and see how many are competing in the space, what is the chronological order and what makes them stand out. This can help you narrow down the field to determine which one best speaks to your needs.
Of course, you want to know that the crypto you are investing in will be around for a while to ensure you see a return on your investment. So how will its development boost your profits? Is there a plan or direction for its growth? Understanding the roadmap can help you identify which altcoin has a bright and prospective future, especially if it has already met certain objectives.
Like everything in life, those most likely to succeed will have a community around them. The same is true for cryptocurrencies. You should check out the community and see if it is active and solid. This helps to validate the coin’s legitimacy and popularity, as it shows there is strong and genuine interest in the coin. It also helps to research the team behind the cryptocurrency and check out their experience and knowledge.
All of these aspects will help you identify the best altcoins in Australia, and which ones are the right option for you.
How to buy altcoins in Australia
Once you’ve narrowed it down, you may be thinking hang on – how do I buy these altcoins? You should start with a cryptocurrency or altcoin exchange. Because they are digital and do not operate in a physical space, you don’t need to find one that is specifically created for the Australian audience. Cryptocurrencies and exchanges are global and operate 24/7, therefore you can pick and choose what works best for you. However, you may want to stick with an altcoin exchange which includes some of the best altcoins in Australia and provides ease of access, a number of fiat currencies and secure storage facilities.
So how do you know which are the best altcoins in Australia? We can look at the best performing altcoins last year to see if there are any popular trends to keep an eye out for this year.
For example, Siba Inu (SHIB), Terra (LUNA), Dogecoin (DOGE), Avalanche (AVAX) and Binance Coin (BNB) were some of the best performing altcoins with returns more than 100-fold. Expectations are high that they will continue to perform strongly this year. But don’t just look at the stats! Do your research and learn more about these high-performers to determine if they are the best altcoins in Australia for you and your investment needs.
Crypto is still a new and nascent technology which means there are many risks involved. But nothing ventured, nothing gained. As long as you understand how to invest wisely and safely, do your research and diversify your portfolio, you should be able to see a strong return on your investment with some of the best altcoins in Australia.