Are Non-Bitcoin Cryptocurrencies Worth Trading?
Cryptocurrencies are digital currencies that allow you to transfer money and make purchases online. Select retailers allow in-person purchases with crypto and there are now crypto ATMs in major cities of the world.
You can also trade crypto – just like you would stocks or other securities. For example, you can trade with or without leverage. You can buy, sell, or hold.
Most cryptocurrency trading platforms provide free demo accounts so you can try the app out via “virtual trades.” eToro is one of the most popular examples.
Bitcoin is the most popular cryptocurrency to trade. Are these crypto alternatives worth trading?
The History of Cryptocurrency and the Rise of Bitcoin
Cryptocurrency got its start with bitcoin, which was first launched in 2009 on the basis of a paper written by an anonymous developer (or developers) known only as Satoshi Nakamoto.
However, bitcoin wasn’t widely known until 2017 when its value skyrocketed during the course of a year — up 20X at one point.
The rise and success of bitcoin, however, has spurred the creation of many other cryptocurrencies, which are collectively referred to as altcoins (which is short for alternatives to bitcoin).
For example, Coin.Market lists over 6,800 cryptocurrency options available to traders as of mid-2020.
Bitcoin isn’t the only cryptocurrency in existence. Many other options have been developed to solve problems that bitcoin hasn’t and often with the hopes of cashing in on bitcoin’s success.
- Dash: Dash is in the top twelve of cryptocurrencies, and transactions using Dash are untraceable.
- Decred: Decred is designed to be a better bitcoin, but has been struggling the past year.
- Dogecoin: Started as a joke currency, Dogecoin nevertheless managed to reach a market capitalization of $60 million in 2014. Today, it is still traded, but its value is low and can inflate infinitely. Dogecoin is not completely valueless, but this is certainly a crypto option to be wary of.
- Ethereum: The second most valuable cryptocurrency in existence, though it seems to be more volatile than bitcoin.
- Litecoin: Litecoin is the third most valuable cryptocurrency in existence but its performance over the past year has been lagging.
- Monero: Monero offers privacy features that appeal mostly to those valuing financial privacy
Is it Worth Trading Altcoins?
As always, the answer is that it depends on your goals. Cryptocurrencies are extremely volatile, so you should never commit more than you can afford to lose. Furthermore, not all cryptocurrencies are valuable (or even entities to be taken seriously).
Trading cryptocurrency is a speculative activity: you are speculating on future price movements over the short-term (seconds, minutes, days). Investors, by contrast, buy and hold assets for the long-term.
Before beginning, pay careful attention to what you’re buying, its history, and where experts (both advocates and naysayers) think crypto prices are going.