Choosing between bitcoin and thousands of different altcoins can be overwhelming. There are several key differences in the characteristics of bitcoin and altcoins that will affect their attractiveness to you as an investor.
Firstly, you should decide how much risk you are willing to take. Bitcoin is the first and most popular cryptocurrency, and it will probably stay as the most prominent token also in the foreseeable future. Even though bitcoin is a volatile asset, it is still referred to as digital gold and a store of value in the crypto ecosystem. Moreover, it is often the trendsetter for other tokens, which means that if it loses 10% of its value in a day, most altcoins will lose their value as well. Adding bitcoin to a crypto portfolio will make it more stable while still tracking the overall growth of the crypto industry. On the other hand, altcoins are more volatile, with potential gains and losses that dwarf bitcoin’s price movements. Some altcoins have the potential to make gains even while bitcoin and other cryptocurrencies are falling.
In addition to your risk exposure, it’s good to decide your investment goal. For example, are you merely saving for retirement, or do you see crypto as a source of regular trading income? Bitcoin can be good for saving because it offers higher than average returns with less risk than other altcoins, and its popularity seems to keep growing. It’s also commonly used for dollar-cost averaging, where users save into the asset fixed amounts regularly. On the other hand, altcoins can multiply the initial investment by tens, hundreds, and even thousands in a bull market. Therefore, finding the “gems” and flipping them can bring you substantial wealth even with relatively low initial investments.
After choosing your goal and how much risk you want to take, it’s good to think about the investment period. Bitcoin, with its massive market cap and mainstream acceptance, is very likely to have value over the long term. Some altcoins may be valuable now, but many projects are still in their infancy and have not proved their use case yet. The companies behind them may succeed or fail to gain market acceptance. It is worth noting that bitcoin was also in the single digits not so long ago, and those who held bitcoin experienced severe volatility. For this reason, investing in altcoins can be a reasonable risk in a short timeframe to ride a hype cycle, or it can be a measured, long-term stake in a project that you genuinely believe in.
In addition to the investment period, finding the right altcoins requires more time and effort than simply buying bitcoin. While bitcoin can be the best cryptocurrency for someone who merely wants to buy and forget, altcoins offer a way for people to be an active member of the crypto revolution and make better returns because of their knowledge. The scope of investment possibilities in this new decentralized market already includes products from finance to art and gaming. And a specific understanding and devotion for a particular market can work to your financial advantage. Altcoins can thus be a good investment option for someone who wants to do their research, follow their interest, and spend more time in the ecosystem.