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Bitcoin and Altcoins: What is the difference?

The global crypto market stands at around $1.2 trillion as of May month. The fluctuations in the market make one wonder if this is a bubble or if it’s the future. Even though crypto traders and Millenials are betting on the potential and future of crypto, mainstream investors are still doubtful about cryptos being more than a bubble.

Bitcoin still holds dominance over the cryptocurrency market. Bitcoin and blockchain have paved paths to unprecedented growth in the cryptocurrency sector. The arrival and popularity of Bitcoin have paved the path for the growth of other cryptocurrencies, like Ethereum, Ripple, etc. As of March 2022, it is believed to exist more than 18,000 such cryptocurrencies. All these cryptos other than Bitcoin are referred to as Altcoins. Bitcoin have reached an all-time high of $69,044.77 in November 2020, and since nosedived more than 58% of its market value and now trades at around $29000 range. Yet it values over 44% of the total crypto market.

Image Source: Unsplash

These Altcoins can be seen as variations of Bitcoin, the original idea behind Altcoins was to add features and functionalities that are not available in the Bitcoin. Wholesome of these coins actually have merits others are essentially all hype and speculation. Coins like Ethereum which stand second to Bitcoin in total market value, have stood the test of time and have given solid returns to the investors, while coins like Luna have plummeted and eroded much of investors’ wealth. Also, fake coins like Squid coins have come up with hype and stolen much of investors’ money.

Also Read: Step by Step guide on How to buy Bitcoin?

Like Bitcoin, these Altcoins also use blockchain tech, however, their mode of operation, purpose, and features vary from one another. The most popular Altcoins are, Ethereum, Ripple, Solano, Cardano, Shiba Inu, Dogecoin etc.

Even with these sheer numbers and volumes, Altcoins are having a hard time catching up with Bitcoin. Even with all these added features and functionalities, these Altcoins have a higher probability of fading away unless they find a strong practical use.

However, people are starting to see bitcoin as means to store wealth. Both institutional and individual investors are increasing their investments in Bitcoin which in turn increases its value and credibility in the longer term. Unlike Altcoins, Bitcoin has proven its ability to withstand market crashes or its ability to bounce back up after a crash.

Also Read: Top 5 cryptocurrencies in India 2022

Bitcoin is so large that it controls the market in such a way that fluctuations in the price of Bitcoin are directly proportional to the price fluctuations of Altcoins. If Bitcoin goes up, Altcoins go up, if Bitcoin plummets so do the others. But these fluctuations in Altcoins seem to be much more volatile than that of the Bitcoin.

Also Read: Explained: Cryptocurrency vs Digital Currency

Investors who want to diversify to Altcoins must consider the risk and volatility associated with them.  With more than 18,000 currencies, it’s a herculean task to find ones that are going to stay. However, the volatility and risks associated with these coins also come with the potential for exponential growth. Smaller Altcoins in the initial stages might have the potential to give unprecedented returns. Risk-averse investors must approach Altcoins with caution because their exponential growths might be short-lived.

Featured Image Source: Data Driven Investor

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