Although Bitcoin is the most well-known cryptocurrency, it’s far from the only one out there. Altcoins are digital assets that compete with Bitcoin, and with so many options available, investors need a clear understanding of how each altcoin differs from Bitcoin and what they can bring to their portfolio.
Regardless of which crypto you decide to invest in, you’ll need to use a reliable crypto platform to buy and sell them, and for that we recommend CoinSmart. Given its security, ease of use, and low trading fees, we can’t recommend CoinSmart enough.
What Is Bitcoin?
Bitcoin is a cryptocurrency that allows you to transfer and receive funds quickly without the need for a central authority or banks. Bitcoin was invented by Satoshi Nakamoto, an anonymous person (or group of people) in 2008.
Bitcoin is not governed by any one individual or group; no single entity has the power to regulate it because there isn’t anyone in charge. However, Bitcoin’s decentralized nature makes it vulnerable to hacking, complicating the question around whether it will ever see widespread adoption or not.
What Is An Altcoin?
The term “altcoin” is short for “alternative coin”, and it refers to any cryptocurrency other than Bitcoin. Altcoins are a decentralized form of digital asset and have been created to provide various solutions to different problems that Bitcoin presents.
Altcoins generally address the traditional criticisms of Bitcoin, such as scalability and sustainability. For example, many alternative cryptocurrencies employ the proof of stake (PoS) consensus mechanism to save energy and time in generating blocks and verifying new transactions. The Ethereum Network uses Ether (ETH), the world’s second-largest cryptocurrency by market capitalization, as gas (or payment for transaction costs) in smart contracts.
Altcoins have established a market by distinguishing themselves from Bitcoin in this manner. As a result, investors have flocked to them hoping to make money as they gain more traction and users. They anticipate profit as altcoins develop popularity and value.
Bitcoin vs. Altcoins: Volatility
When Bitcoin rises, altcoins typically rise as well, and when Bitcoin falls, so do altcoins. However, it’s worth keeping in mind that the rises and drops of altcoin prices are far more volatile than those of Bitcoin.
Nonetheless, certain investors see potential in altcoins in a market where Bitcoin is trading at all-time highs. It’s important to consider the risks involved with alternative cryptocurrencies when diversifying into them: after all, there are more than 10,000 cryptocurrencies to date, implying that the likelihood of picking one of the few that will endure is slim.
Bitcoin vs. Altcoins: Liquidity
One of Bitcoin’s key benefits is its liquidity, which is the ability to buy and sell it quickly without affecting the price. Altcoins, on the other hand, are much less liquid. This means that they can be difficult to trade and that their prices may be more volatile as a result.
However, this is not to say that altcoins are not worth investing in. On the contrary, some argue that with their increased volatility comes increased opportunity for profit.
Bitcoin vs. Altcoins: Risk
Both Bitcoin and altcoins are risky investments. Cryptocurrencies are a new asset class and their prices are highly volatile.
However, altcoins tend to be even riskier than Bitcoin. This is because they often offer less liquidity, have a smaller market capitalization, and their prices are more easily manipulated. Bitcoin, on the other hand, is more widely accepted and has a larger market capitalization, making it more resistant to price manipulation.
When investing in Bitcoin or altcoins, always make sure to never invest more than you can afford to lose.
The Failure Of Altcoins
Quite a few altcoins have come and gone, whereas Bitcoin has persisted. This is likely because Bitcoin was the first cryptocurrency and has the first-mover advantage. It also has a large network of users, developers, investors, and businesses supporting it.
Altcoins have failed for various reasons. Some were simply scams created to make money for their founders. Others lacked the team or community support necessary to sustain them.
Still, some altcoins have managed to stick around and even thrive. Ethereum, for example, is the second-largest cryptocurrency by market capitalization and is used by hundreds of thousands of businesses worldwide.
Are Altcoins A Good Investment?
It depends on the altcoin. Some are riskier than others, and some offer more potential for gain. For example, well-established altcoins like Litecoin (LTC) and Ethereum (ETH) may be less risky investments than newer altcoins.
Of course, the choice of investing in Bitcoin or altcoins will be different for everyone and will largely depend on your investment goals and risk tolerance. However, one thing remains consistent: in order to buy Bitcoin or altcoins quickly and easily, you’ll need to use a reputable cryptocurrency trading platform.
For that, we recommend CoinSmart, an excellent Canadian crypto platform. Here’s a bit more about why we recommend CoinSmart and how you can open an account with them today:
Introducing CoinSmart: Canada’s #1 Crypto Platform
Trading fees: 0.2%
I recently broke down 10+ of Canada’s most popular crypto platforms, and CoinSmart came out on top. It scored so well because it excels on what I believe are the three most important factors when choosing a crypto platform: fees, security, and customer support.
Here’s how CoinSmart performs in each of those areas, and why I believe it’s the best crypto trading platform in Canada. And to get your $50 signup bonus with CoinSmart, use this signup link and the special promo code YOREOYSTER.
#1 Lowest Fees In The Industry
CoinSmart’s trading fees are just 0.20%, the lowest of any crypto platform in Canada. And those savings add up quickly: if you trade $100,000 worth of Bitcoin in a given year (buying and selling $25,000 worth twice), you’ll save $800 in trading fees compared to a platform that charges 1% ($200 vs. $1,000).
Perhaps more important than trading fees, though, are spreads: the difference between the Buy price and the Sell price. CoinSmart has razor-thin spreads, which makes day trading possible and keeps more money in your pocket.
#2 Bank-Level Security
CoinSmart maintains a 95% cold storage policy, which means at least 95% of its users’ crypto is always held offline. This is a security measure that only the most advanced trading platforms employ, and CoinSmart is leading the charge.
CoinSmart is also the only publicly traded crypto platform in Canada, which means it’s subject to far more financial scrutiny than any other platform. It’s regulated by FINTRAC (the Financial Transactions and Report Analysis Centre of Canada) and the OSC (Ontario Securities Commission), and its financials are audited by external professionals at least once per year.
#3 Excellent Customer Support
CoinSmart offers 24/7 customer support via phone, live chat, and email, and their customer service reps are actually helpful rather than just following a script. I’ve never had to wait more than about 60 seconds on hold, and they’re very responsive via live chat and email, too.
The only time I ran into an issue with CoinSmart, I called them and had it sorted out within 5 minutes. Keep in mind that telephone and live chat support is only available for registered users, so if you have a question for CoinSmart, the best way to get it answered is to open an account.
Although Bitcoin is the most well-known cryptocurrency, it isn’t the only one available. Investors interested in altcoins must first have a firm grasp on the basic differences between Bitcoin and alternative coins, as well as what each one has to offer their portfolio.
Whether you choose Bitcoin, Ethereum, or some other cryptocurrency, you’ll need to buy and sell them on a trustworthy crypto trading platform. For this purpose, we recommend using CoinSmart because of its security, simplicity of use, and the fact that it has some of the lowest fees of any trading platform in Canada.