It has been the most famous cryptocurrency since its launch in 2009. Bitcoin was the first digital currency, and it had such a big share of the market that any new cryptocurrency was called an “altcoin.” An “altcoin” is any coin that is not Bitcoin.
Fast forward to today, and the cryptocurrency landscape has evolved greatly, with thousands of altcoins vying for a slice of the market. But what do altcoins really mean? This year, which ones should you keep an eye on? Could any of them beat Bitcoin?
Understanding Altcoins
“Altcoin” is short for “alternative coin,” and it means any cryptocurrency that isn’t Bitcoin. Bitcoin was the clear leader in the early days of cryptocurrency. It was also the first digital currency that didn’t have a governing bank. As new coins came out, they were often seen as just different from Bitcoin, which is how they got the name “altcoins.” Altcoins are any digital currencies that are not Bitcoin. The meaning has changed over time, but the main idea has stayed the same.
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At first, there were not many altcoins—only a couple dozen were competing with Bitcoin. Today, though, the market has gone crazy, and experts say there are now over 15,000 different cryptocurrencies. Despite this proliferation, Bitcoin remains the biggest cryptocurrency by market capitalization, valued at more than three times the size of its closest competitor, Ethereum, according to CoinMarketCap.com. Beyond Bitcoin and Ethereum, the market quickly fragments, with a plethora of altcoins each carving out their area.
Different Categories of Altcoins
Investors have a lot of options because there are so many altcoins to choose from. However, the majority of trading volume tends to concentrate around a few major players, especially those with strong technical foundations, like fast transaction speeds and robust security. Let’s explore the main types of altcoins:
1. Mining-Based Coins: These are cryptocurrencies that are made through a process called mining, which involves solving complex mathematical problems using computer networks. A lot of altcoins work the same way as Bitcoin, which is built on mining. Mining can use a lot of energy, but it has been shown to be a good way to keep blockchain networks safe and the currency’s decentralized nature.
2. Stablecoins: Stablecoins are tied to a reserve of assets, usually fiat currencies like the U.S. dollar, to keep their prices from going up and down too much. The idea is to maintain a stable value, making them more practical for everyday transactions. Tether (USDT) and USD Coin (USDC) are two of the most popular stablecoins. A lot of stablecoins are stable, but not all of them are. For example, TerraUSD collapsed in 2022, demonstrating the risks even in this apparently safer category.
3. Security Tokens: Unlike most cryptocurrencies, which are mainly used as a means of exchange or a store of value, security tokens represent ownership in another asset, such as real estate or stocks. You can split up ownership of real or digital assets with these tokens. They act as a link between traditional finance and the new world of blockchain.
4. Memecoins: These are cryptocurrencies that gain popularity primarily due to online communities and social media, rather than because of any inherent technical superiority or utility. Dogecoin and Shiba Inu are the most well-known examples. Memecoins are often subject to dramatic price swings, driven by speculation, star endorsements, and viral trends, rather than by underlying value.
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Leading Altcoins to Monitor
As of July 2024, here are the 10 biggest cryptocurrencies by market capitalization, excluding Bitcoin:
1. Ethereum (ETH): Ethereum is the second-largest cryptocurrency. It is a decentralized platform that lets smart contracts and decentralized apps (DApps) run without any problems, fraud, or outside interference. Ethereum has stayed a top alternative currency because it is flexible and has a strong group of developers.
2. Tether (USDT): As a stablecoin pegged to the U.S. dollar, Tether is widely used as a substitute for fiat currency in trading cryptocurrencies, bringing liquidity and security to the market.
3. BNB (Binance Coin): Originally formed as a utility token for the Binance cryptocurrency exchange, BNB has expanded its use cases to include transaction fees on the Binance platform, payment for goods and services, and more. It’s a top altcoin because of Binance’s prominence in the crypto space.
4. Solana (SOL): Known for its high-speed transactions and low fees, Solana has become a favorite for developers and traders looking for an efficient and scalable blockchain option. A lot of people like Solana because it has strong technical foundations and can host decentralized applications.
5. USD Coin (USDC): This is another stablecoin. USDC is controlled and fully backed by U.S. dollars, so it’s a safe choice for people who want to avoid the volatility of other cryptocurrencies.
6. XRP (Ripple): XRP is designed to make cross-border payments quick and cheap, and it aims to be an alternative to current financial systems. Banks and other financial institutions use it a lot because it is quick and easy.
7. Toncoin (TON): Originally developed by Telegram, Toncoin is focused on integrating cryptocurrencies into everyday applications, such as messaging apps and social media platforms.
8. Dogecoin (DOGE): Dogecoin was made as a joke at first, but now it has a huge following and is getting a lot of attention from famous people like Elon Musk. It’s known for its lively community and its use as a tipping currency on social media.
9. Cardano (ADA): Aimed at building a more balanced and sustainable ecosystem for cryptocurrencies, Cardano uses a unique proof-of-stake consensus mechanism called Ouroboros. Its main goals are to be scalable, interoperable, and long-lasting.
10. Polkadot (DOT): Polkadot wants to make it possible for blockchains to send messages and value without having to trust each other. They want to do this by letting blockchains share their unique features while also getting better security.
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Key Considerations Before Investing in Altcoins
Putting money into altcoins can be a risky but profitable business. Here are some important things that possible investors should think about:
Understand the Volatility: Cryptocurrency prices are highly unpredictable, and altcoins, in particular, can experience extreme price swings. Unlike stocks, which are backed by a company’s assets or income, cryptocurrencies are driven purely by market sentiment. This means that news, gossip, and even social media trends can have an effect on prices, causing prices to change quickly and sometimes in ways that are hard to predict.
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Focus on Popularity and Market Sentiment: The most popular coins tend to get the most investment because bitcoin markets are based on how people feel about them. The market is mostly made up of Bitcoin and Ethereum, but every once in a while, an altcoin like Dogecoin or Shiba Inu can catch people’s attention and see its value rise significantly. But this can only last for a short time, and many currencies that aren’t as well known may never catch on.
Technical Fundamentals: When evaluating an altcoin, consider its technical capabilities. Does it offer something new or better than other cryptocurrencies? For example, Solana’s fast transaction speeds and low fees have made it popular among coders and users alike. Knowing how an altcoin works technically can help you judge how popular it will be and how successful it will be in the long run.
Investment Risks: Cryptocurrencies are not backed by any real assets or guarantees, making them inherently risky. Always assess whether you can afford to lose the money you invest in altcoins, as there is a real chance of losing your entire investment. Cryptocurrencies are not good for everyone because they are very volatile and based on speculation. People who don’t like taking risks should avoid them.
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Could Altcoins Surpass Bitcoin?
As of now, no altcoin has been able to beat Bitcoin as the most valuable or well-known cryptocurrency. However, the world of cryptocurrencies is fluid and always changing. Altcoins are slowly but surely eroding Bitcoin’s market dominance, which is good for the general growth and diversification of the cryptocurrency market. However, overtaking Bitcoin in the near future is a tall order, given its entrenched position as the pioneer and its strong network effects.
Final Thoughts
Altcoins are a big and varied world that gives buyers a lot of chances and risks. While Bitcoin continues to dominate, altcoins provide diverse use cases and innovations that keep the market vibrant. As the cryptocurrency space continues to evolve, keeping informed about the latest trends and technological advancements is crucial for anyone looking to invest in this exciting but volatile market. It’s still too early to tell if altcoins will eventually become more popular than Bitcoin, but their growing presence suggests that they will continue to have a big impact on the future of digital money.
