What is an Altcoin? | Definition & Examples for investors


An Altcoin, a portmanteau of ‘alternative’ and ‘coin,’ refers to any cryptocurrency other than Bitcoin (or Ethereum, as some consider). Altcoins set themselves apart from Bitcoin and Ethereum by offering distinct mechanisms for transaction confirmation or introducing novel features and use cases. The market currently hosts thousands of Altcoins.

Depending on their purpose, Altcoins come in several types. Most Altcoins are forks (a blockchain that has been split due to incompatibility with the original chain, either Bitcoin or Ethereum).

Altcoins in a Nutshell

  • Altcoins are non-Bitcoin cryptocurrencies with unique features.
  • Litecoin, created in 2011, was the first Altcoin, followed by others like Namecoin.
  • Altcoins constitute nearly 60% of the cryptocurrency market.
  • Pros: Improved features, higher rewards, diverse options, increased survivability.
  • Cons: Lower market share, liquidity than Bitcoin, risks, limited accessibility, smaller market cap, higher speculation.

The top two Altcoins are USD Coin and Tether (USDT), based on market capacity. 

History of the Altcoin 

The first Altcoin was forked in 2011 from the Bitcoin blockchain. It was called Litecoin and used a memory-hard mining puzzle with the intent of being GPU-resistant. 

A little after that came Namecoin. Its objective was to decentralize and replace the domain name system.

As of October 2021, Altcoins account for virtually 60% of the cryptocurrency market.

Altcoin’s debut rates began to rise quickly in 2013-2014 and have continued to grow until now. In 2017, around 600 new Altcoins entered the market and caused the market to head in the direction of becoming over-saturated.   

Altcoins and their types

Altcoins still belong to the blockchains for which they got designed. Their use is still valid within them to accomplish a specific task such as payment of transaction fees. 

Altcoins are of different types as they vary in use.

Here’s a basic summary of them, along with their intended purpose:

  • Payment Tokens (e.g. Litecoin) are similar to a currency.  
  • Stablecoins (e.g. Tether) intend for savings or sending money. They follow the price of another valuable market item to reduce market volatility.  
  • Security tokens (e.g. Polymath) are like an investment tool and signify the transfer of value or rights of ownership of a tokenized asset. 
  • The use of Utility tokens (e.g. Binance Coin) within a network to provide services is common.
  • Meme coins (e.g. Dogecoin) are coins inspired by a meme or viral joke. 
  • Governance tokens (e.g. Maker) are exclusive to private blockchains and give owners voting rights to help direct the coin’s future. 
  • Mining-based coins (e.g. Ethereum) use mining to confirm transactions and increase the coin supply.
  • Staking-based coins (e.g. Cardano) use staking to confirm transactions and increase coins to the supply. 

Altcoins pros and cons

Like every investment market and opportunity, Altcoin has pros and cons that one should know before entering the market. 

Altcoin pros
  • They have improved on elements of Bitcoin.
  • These provide higher prospective rewards than Bitcoin.
  • Altcoins offer a wider selection to choose from with more utility. 
  • They have a higher survivability rate due to their increased utility. 
Altcoin cons
  • They can’t compare to Bitcoin’s market share and are less liquid than Bitcoin. 
  • They hold a significant risk, as many Altcoins are either scams or failures or lose market interest.
  • Many Altcoins are hard to access and buy due to only being available on limited Altcoin platforms.
  • They have a smaller market cap (Definition & example of a market cap can be found here). 
  • Altcoins are even more speculative than Bitcoin.

Can you trade Binary Options on Altcoins?

Yes, it is possible to trade Binary Options on Altcoins. Binary options refer to financial instruments in which you can speculate on the price of an asset without owning it.

For example, you can bet that the price of Litecoin will be above $80 at the end of a certain period. If you believe this will be the case, you buy the option and if you believe it will not, you sell it.

Altcoin trading with binary options offers a much higher yield availability than other trading methods. It also carries an increased risk factor, as there is the potential to lose all your money if the price of the shares goes down, against your prediction.

What is an Altcoin Binary Option?

Altcoin Binary Options work like any other binary options in traditional markets. You make a prediction on whether the price of an Altcoin will rise or fall within a certain time frame. If your prediction is correct, you win, otherwise you lose.

As a financial instrument, Altcoin Binary Options are very flexible – you can use different time periods. Normally, the time frames start at 5 seconds and go up to at least an hour. There are only two ways to place a trade:

  • Call / Higher: Your forecast is that the price of the Altcoin will be higher than its current value when the option expires.
  • Put / Lower: Your forecast is that the price of the Altcoin will be lower than its current value when the option expires.

Can you deposit with Altcoins on Binary Options Brokers?

Yes, it is also possible to deposit Altcoins on Binary Options BrokerUnlike other payment methods, there are no hidden fees or costs. The minimum deposit is just $10 and the broker automatically converts your Altcoins into regular money.

Another benefit of Altcoins is that they can be used anonymously. Transactions are very fast and there are fewer fees for the broker and the trader. In other words, it is an advantage for both sides.

Conclusion

One can find it hard to pick the right ones to invest in due to the sheer volume of Altcoins and the higher risk they present. Crypto has a fleeting value risk, so Altcoins are a good option for those that would like to add crypto to their repertoire. These are also suitable for those willing to put in time and effort to do their research before making their pick. 

About the author

Percival Knight
Percival Knight is an experienced Binary Options trader for more than ten years. Mainly, he trades 60-second trades at a very high hit rate. My favorite strategies is by using candlesticks and fake-breakouts

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