ALTCOINS: What are they and how do you trade them for a potential profit.
November 23, 2022
What are altcoins?
The term “Alt-coin” is coined from two words: “alternative” and “coins.” They are cryptocurrencies other than bitcoin. Although it has been said that “alt-coins” are coins other than Bitcoin and Ethereum because most of the other coins were developed from these two, Most altcoins are designed because the developer feels there is a gap that Bitcoin has not covered, and to the developers, this is seen as a competitive advantage. Alt-coins take up 60% or more of the crypto market.
Let’s briefly discuss a few of the most well-known alternative coins now that we’ve defined what they are. We will touch on three of them in this article:
- Ether: Some people consider Ether an alt-coin because, well, it was developed after bitcoin, which is considered the mother of all other coins. Ether being the native coin of the Ethereum blockchain, is part of a bigger ecosystem whose innovation allows for the creation of other applications called decentralized applications, or DApps.
- Litecoin: Litecoin is like the baby brother of bitcoin because of its similarities. Litecoin was one of the earliest altcoins developed in 2011 by Charlee Lee, and one of its major advantages over bitcoin is that it takes less time to process each transaction (bitcoin takes 10 minutes and litecoin takes 2.5 minutes). The native token for Litecoin is LTC.
The last alt-coin we will be considering is called Solana.
3. Solana’s native cryptocurrency is SOL. One of the unique features of Solana is that it offers a faster transaction speed than its closest competitors, such as Ethereum and Cardano, at only a fraction of the cost.
So we’ve succeeded in defining altcoins, and three examples have been discussed briefly and hopefully understood. Let’s quickly run through what the advantages and disadvantages of altcoins are. Are there any? Yes, they are.
The advantages of altcoins are:
- Alt-coins generally try to fill a gap in the market that the developer feels has yet to be filled.
- There are a lot of alt-coins, so investors are spoilt for choice, i.e., you get to choose from different alt-coins with different and exciting use cases.
- Since alt-coins are developed to fill a gap and may be considered useful in a lot of cases, they have a better chance of surviving in this competitive industry.
What disadvantages of alt-coins can you think of? Well, here are some of them.
- Some altcoins may be scams. That may be a scary thought, but it is possible. So remember to do your research. Others who may not have started as scams may fall off the wagon along the way due to stronger competitors. thereby sinking with the funds of investors.
- It may be difficult to determine what the use of an altcoin is.
- Alt-coins have lower investments compared to bitcoin, and this does not help their liquidity.
Now, to the crux of the matter:
How do you trade alt-coins? Trading altcoins is quite similar to trading bitcoin.
- It goes without saying, but you need to have an account with a trading platform, which may be Binance, Bit.io, etc.
- Find out what moves cryptocurrency markets. Ask yourself, “What makes a trend?”
Let’s quickly answer that:
The cryptocurrency market moves like every other market, according to demand and supply.
So if there is a high demand for the coin, the price goes up, and if there is an excess supply, the price goes down. The way the coin is perceived in the media also affects its demand and supply. So, if the media gushes about how wonderful the coin is, its demand goes up, and if they make negative comments about it, demand goes down, which of course affects the price.
- Pick the coin you want to trade, and of course, research properly before making a choice.
- We have established previously that cryptocurrency is a very volatile product, so set a stop-loss order to limit your loss. A stop-loss order is simply when you set a limit to sell. Such that, if the price of the coin falls below a certain price, the system of whatever platform you’ve chosen to use will automatically sell the coin for you.
- Set a limit: Setting a limit level is similar to setting a stop loss order, but the difference is that a limit order sells your coin if the market moves in your favor and the price goes up. To secure your profit, you set a limit order, and the system will automatically sell the coin for you.
Some traders predict the market trend by reading the candle chart of the coin they intend to trade. This is a useful skill that must be learned and properly understood.
Now that we’ve discussed all that, please note that this article is strictly for educational purposes and is not intended as financial advice. I also must warn you that cryptocurrency trading can be risky and should be done with great care and after much research, or else great losses may be incurred. Please remember to do proper research before embarking on this venture.