Is it worth investing in Altcoins?

Altcoins They tempt with huge profits, but they can just as easily ruin your wallet. Is it really worth investing in them? What are the opportunities and threats they pose? Can you predict the perfect time to buy and avoid the market traps? In this article, we will look at what altcoins are, whether they are worth investing in, and what opportunities and threats they may involve. We will also discuss when is the best time to buy altcoins and how to do it safely.

What are altcoins?

Altcoins (eng. alternative coins) are all cryptocurrencies other than Bitcoin. This name comes from the words alternative (alternative) and coin (coin), because they were created as an alternative to Bitcoin, offering different technologies, functions and applications. Bitcoin, as the first cryptocurrency, dominates the market to this day, but over time tens of thousands of other projects have emerged that have tried to be either an alternative to BTC or offered completely new solutions, such as smart contracts, DeFi (decentralized finance), Crypto Gaming or a combination of blockchain technology and the cryptocurrency ecosystem with AI technology.

Is it worth investing in altcoins?

Investing in altcoins has many potential benefits that attract both beginners and experienced investors.

Altcoins often have a much lower market capitalization than Bitcoin, which means they can grow faster in percentage terms. In simple terms, this means that while Bitcoin can grow by a few dozen percent during a given period of growth, some altcoins can see growth in the hundreds or even thousands of percent. This is usually the case especially with new projects that are just gaining popularity, although this is not a “rule of thumb,” as evidenced by the growth of Ethereum or Solana over various periods market cycles. New altcoins with very high growth potential appear on the market regularly. Investors who see the potential of a given project early can relatively easily benefit from its growth.

Moving on, altcoins are often based on new technologies and solutions that go beyond the functionality of Bitcoin. Ethereum enabled the emergence of smart contracts, Solana and Avalanche offer faster transactions and greater scalability, and Monero provides anonymity. Investing in altcoins gives you the opportunity to gain exposure to the growth of innovative projects and technologies that can play a key role in the development of blockchain technology and the cryptocurrency market, which attracts various investors.

In the context of altcoins, the so-called unit bias is also important. In short, Bitcoin, due to its high unit price, may be less convincing for investors. Although you can buy a fraction of it, it is psychologically easier to invest in altcoins that cost, for example, a few dollars or cents per unit. This gives a sense of greater growth potential.

When wondering whether it is worth investing in altcoins, it is worth knowing that they offer many interesting opportunities for earning money, but investing in these assets is also associated with significant risks.

Altcoins are much more volatile than Bitcoin (which is relatively volatile in itself). Altcoin price increases can be dynamic, but they can also be followed by rapid declines, often (and depending on the project) as much as 80-90% from the peak. Many altcoins lose their value during bear markets and do not regain it during the next bull market. Many altcoins also lose significant value during corrections in an uptrend, and it is not at all certain that they will return to strong growth when optimism returns to the market.

Moving forward, when investing in this market, you should be aware that many altcoins are created without the oversight of financial markets authorities (since cryptocurrencies are not securities), which makes them more susceptible to fraud and market manipulation. Not all altcoins are also available on major exchanges, and they can be traded on lesser-known platforms with low liquidity. This can make it difficult to sell larger quantities of tokens without causing a sharp price drop.

In addition, there are thousands of altcoins on the market, and many projects do not survive the test of time. Even if a given altcoin has innovative technology, it can be displaced by the competition or lose its importance. An example are projects that gained popularity in 2017-2018, and today are almost forgotten. When investing in altcoins, you should therefore be very careful in using the "long-term investing" strategy. When considering whether it is worth investing in altcoins, you should carefully consider why you want to engage in trading these cryptocurrencies.

When to invest in altcoins?

The cryptocurrency market operates in specific cycles that historically repeat themselves. There are several main phases of this cycle. During the bear market, altcoin prices are low and many investors lose faith in the market, which creates buying opportunities. Then comes the accumulation phase, when prices slowly stabilize, but there is still little interest from new investors - this is a good time to build a position. The next stage is the bull market, during which Bitcoin begins to grow, and after it usually comes the altcoin season - a period when altcoins grow faster than BTC. The last stage is the peak of the bull market, when altcoin prices reach extreme values, often driven by emotions and speculation - this is the ideal  moment to leave the market permanently.

Of course, it is much harder to do than to say, but in theory, when entering the cryptocurrency market, one should look first for a good place in the market cycle. In the context of altcoins, on the other hand, it can be briefly considered that the best time to enter the market of these assets is when the investor expects that in the expected investment time horizon, the altcoins he has chosen will earn more than BTC. Otherwise, why keep assets with a higher risk profile in the investment portfolio? Such a moment is the aforementioned altseason, which is manifested, for example, by a decline in BTC dominance, but this is not always necessary. Sometimes it happens that selected altcoins grow more than BTC and this without a broad growth of altcoins on the cryptocurrency market. Observation BTC dominance it can, however, help determine the right time to invest in altcoins – its decline often means that capital is flowing into altcoins, which promotes their growth.

How to safely invest in altcoins?

Safe investing in altcoins requires a thoughtful approach, because the cryptocurrency market is, on the one hand, very volatile, and on the other hand, full of various types of scams.

One of the best ways to start trading is to use a reputable exchange that offers high levels of security, a wide selection of cryptocurrencies, and an intuitive interface. Diversifying your portfolio may also be key – instead of investing everything in one project, why not spread your funds across several altcoins? BingX has broad access to over 1000 currency pairs, which makes this process much easier.

The foundation of safe altcoin investing is risk management. Don't invest more than you can afford to lose, set stop-losses, and avoid impulsive decisions made under the influence of emotion.

Summary

Altcoins offer huge earning potential, but they also carry just as much risk. They can grow faster than Bitcoin, but their volatility means that not every investment will be a success. The key is to have a good feel for the market cycle and consciously manage your risk. Choosing a reputable exchange like BingX, diversifying your portfolio, and avoiding emotional decisions are the foundations of safe trading. Investing in altcoins can be profitable, but it requires knowledge, strategy, and caution.