Justin is an active trader with more than 20-years of industry experience. He has worked at big banks and hedge funds including Citigroup, D. E. Shaw and Millennium Capital Management.
Bitcoin tends to grab the headlines but other cryptocurrencies, known as altcoins, can have even more dramatic price moves. The interest in Altcoins stems from the possibility of them being able to take over from bitcoin as the dominant crypto in the future. There are reasons to believe one of them could claim that prize, which leaves many wondering how and where to buy altcoins. As such, this article will cover the following:
Altcoins is the name of a group of cryptocurrencies that appeared after bitcoin. Specifically, an altcoin is a cryptocurrency that is not bitcoin. There are more than 5,300, each one with its unique features, each with a chance to be the dominant coin in the future.
They operate using the same blockchain technology and aspire to be useful as a store of wealth and a means of exchange. They want to do what bitcoin does but use subsequent technological developments to do it better.
The space for altcoins to come in and challenge bitcoin stems from the technological nature of cryptos. Bitcoin first came about in 2009. Being the first entrant offers BTC a heap of advantages. It also offers its competitors a chance. The sector is an emerging one, so there are always lots of new ideas and systems being developed.
Altcoins attract attention because they claim to take the best bits of bitcoin, but not the features of BTC, which now don’t look like such a good idea. The sector is one that is dominated by advances in technology and feeds through into higher prices.
An important note here is that the altcoins by size and market capitalisation, might not necessarily be the top best picks if you’re looking to buy altcoins. In the same way that bitcoin is fending off competition from its rivals, so are more established altcoins. It’s a fast-moving and competitive environment.
Bitcoin has a market capitalisation of $199bn, which dwarfs the size of the rest of the leading altcoins, even when they are combined. But bitcoins use as a store of value is not matched by its use as a means of payment.
Transactions using bitcoin can take up to 10 minutes to clear. That is a considerable handicap to any ‘currency’ looking to become a means of exchange. Altcoins focus on working around legacy IT systems and protocols to make themselves more usable.
If any of the altcoins can improve on the transaction times, they will be a strong contender for being the global cryptocurrency of the future. At that point, the value would skyrocket.
When they first started, buying altcoins required setting up specialist wallets and registering with a dedicated crypto exchange. That route is still possible, but it looks first-generation compared to the super-friendly functionality of online broking sites.
As demand for cryptos has gone more mainstream, additional brokers have entered the space to provide the opportunity to buy altcoins.
Once you’ve completed the registration process and wired in funds to your broker account, you’ll be ready to enter into the altcoin market. The sites are a packed full of trading tools to support beginners and advanced traders. There are also customer service teams on hand to help with queries.
Trading altcoins is as easy as clicking a button or tapping a screen. It can be done in desktop format or on the go using handheld mobile devices.
Sites such as eToro, IG and Pepperstone allow you to by Altcoins using CFDs. If you select the right broker, the counterpart you’ll be trading with will be regulated by a tier-1 authority such as the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) or the Australian Securities and Investments Commission (ASIC).
Broker comparison sites are an excellent way to narrow down the field. This piece of research has done some of the hard work for you and has shortlisted the names of some good crypto brokers.
One good tip when considering where and how to buy altcoins is to take advantage of the free demo accounts that the better brokers offer. These are a risk-free way to get a better understanding of how each altcoin market trades and if a particular broker is a good fit for you.
This could be the million-dollar question. It could also be the ‘zero-dollar question’. Valuing altcoins involves a binary equation. If the one you choose succeeds and becomes the world’s base currency, its value will be far greater than it is today.
To succeed, altcoins will need to meet the same criteria as all fiat currencies.
Bitcoin currently has a strong market position in terms of the ‘store of value’ criteria. As a result, if you’re looking to buy altcoins, you might want to look at which one seems likely to be strong on the other two points.
Some of the studies of altcoins involve breaking down the infrastructures and protocols they use. The protocols facilitate the exchange of personal data and provide security and access to each blockchain system. Each crypto is trying to find the balance between security and processing speed.
There are plenty of free to access research sites that break down the tech-jargon into a format that allows you to get a better idea of each crypto’s pros and cons. Key terms to familiarise yourself with include:
Analysis needs to factor in more than high-brow notes relating to mathematics and computer systems. It also needs to factor in real-world challenges. Altcoins and bitcoin are part of a movement that has a stated aim to revolutionise the global financial system. That means they are up against a lot of vested interests.
Central banks, investment banks and high street banks face a dilemma because blockchain technology is an innovative and cost-saving tool. Many banks are already a long way from adopting its use and accepting cryptocurrencies are a bona fide currency does expose them to a disruptor, which could work against their interests.
Many who buy altcoins are trading a change in the chances of that crypto being successful. The markets are such that good news can lead to a significant price spike. It’s not necessarily the case that you have to hold that coin for the length of time for it to be finally successful, or not.
Altcoin trading is as popular with speculators as much as investors. For them, it’s about finding the altcoin that is mispriced, rather than the one that will beat the other thousand contenders to first prize.
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