Bitcoin Vs. Altcoins

Bitcoin is the most well-known digital currency and the market leader by market capitalization, but several cryptos threaten its position. All the other cryptocurrencies on the market defined as alternatives to Bitcoin are named altcoins for short. But most of them are created in the spirit of the oldest digital currency and are blockchain-based and decentralised tokens. However, there are several categories of altcoins that serve different purposes and have diverse roles, depending on the blockchain that hosts them and the developers’ objectives.

Currently, there are tens of thousands of altcoins available in the crypto sector. Ethereum is the most popular and second in line to Bitcoin, according to market capitalisation.

If you’re new to the crypto market, it’s best to find out more about Bitcoin and its alternatives to make smart investment decisions.

At the end of July, the global cryptocurrency market had a total market capitalisation of $996 billion. Bitcoin holds over 41% of the total market share, and Ethereum accounts for around 20% of it. The other altcoins hold the rest of the market.

Bitcoin is the oldest and most well-established digital currency, so it’s only natural for altcoins to have lower valuations as they’re younger and more experimental. However, many altcoins bring greater innovations in the sector than Bitcoin. Considering that Bitcoin has reached its value in over 15 years, some crypto investors hope to find an altcoin that could deliver the same investment return in the long run. With the high volatility the market is subjected to; no one can guarantee that Bitcoin will maintain its position or another digital currency will overcome it in value at a certain point.

At the moment, the market is going through a bear run and Bitcoin, along with all altcoins registered drops in value. If you want to find out how Bitcoin is doing at the moment, consult the Bitcoin price chart to see its evolution.

Are there similarities between Bitcoin and altcoins?

All cryptocurrencies are speculative assets, so both Bitcoin and alternative coins are volatile. Considering that altcoins were developed to dethrone Bitcoin, they have similar characteristics because they were developed on blockchain systems. All digital currencies are peer-to-peer systems that serve as mediums of exchange. People can complete digital transactions and buy services and goods with cryptocurrencies. Users need a digital wallet to buy, sell or store any kind of digital currency. All cryptocurrencies are decentralised, so they require no third-party involvement to process transactions. Also, there is no central entity to control blockchain networks.

Are there any differences between Bitcoin and altcoins?

The main difference between Bitcoin and alternative tokens is that Bitcoin has been around much longer than any other digital currency and has survived and overcome several crises. Its price has historically been higher than any alternative token because it’s well-established, and investors consider it a store of value.

Understanding Bitcoin

Bitcoin was the first cryptocurrency launched on the market by a developer or group of people under the pseudonym Satoshi Nakamoto in 2009. Bitcoin is the original digital cash created on a blockchain to work as a ledger and record the transactions completed on the decentralised peer-to-peer network. All Bitcoin transactions are verified because the network uses encryption that allows users to transact and exchange tokens anonymously and securely.

No one controls or governs Bitcoin, and investors consider it a scarce asset because only 21 million coins can be created, no matter what. This feature makes its value increase over time. The fewer Bitcoins in circulation, the higher the token’s price is expected.

Understanding altcoins

Crypto experts see any other cryptocurrency other than Bitcoin as an altcoin. They all were created to address the issues Bitcoin experiences, like security problems and transaction speed, or to offer extra functions. Litecoin was the first alternative coin launched on a fork of Bitcoin in 2011. At that point, there weren’t too many alternative currencies on the market, and crypto specialists used the term altcoins to refer to them. Now, the category includes thousands of coins.

If you’re a crypto investor, you have a wide variety to choose from, supposing you want to add altcoins to your portfolio. However, before buying alternative coins, it’s smart to learn more about the types of altcoins available on the market.

Mining-based coins are put into circulation by computer networks that solve mathematical puzzles through the use of huge amounts of energy. Bitcoin is a mining-based coin, as are many altcoins.
Stablecoins are cryptocurrencies with their value pegged to another asset like the US dollar. They track the asset they’re connected with and try to maintain their prices equivalent to the currency. However, not all stablecoins are stable. History shows that many collapsed when the market entered bear runs because their stabilisers failed to keep up with orders from traders who sold their positions.
Memecoins are digital currencies that have taken the public’s fancy due to the buzz created around them by celebrities like Elon Musk. Crypto specialists believe that memecoins have lottery-like features because their prices rise and fall precipitously.
Utility tokens are digital currencies created to execute particular functionalities on the blockchain.
Security tokens are digital representations of digital contracts or physical assets that provide ownership to assets that hold value.

Factors to consider before buying altcoins

Diversifying your portfolio during the crypto winter is recommended to reduce your risk exposure. However, before buying altcoins, here are some factors to consider:

– Look for coins with a big community because investors herd around reliable projects.

– Invest only the money you afford to lose because cryptocurrencies are volatile assets that register great fluctuations in value.

– Study the coin’s technical capacity before adding it to your portfolio because it’s important to buy cryptocurrencies that offer high functionality at affordable costs.

Final words

Altcoins are gaining more popularity daily, and while they might not be ready to unseat Bitcoin, they will most likely continue to chip away at market share from it.

Bitcoin Vs. Altcoins – understanding the differences