Altcoin investing - what to consider

Altcoin investing - what to consider

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As the crypto bull market gathers momentum, many investors and traders are looking to increase their gains. Bitcoin might be a safe bet, but if you didn’t buy it at the beginning of 2023 you may not see fantastic gains. Are altcoins the place to go for those gains?

Bitcoin not likely to make huge gains from here

With all the mud that was slung at Bitcoin during its earlier formative years, where those that seemed to come mainly from the banking and from traditional financial institutions parroted each other on how $BTC was only useful for various illegal activities, these days Bitcoin has finally managed to attract the respectability that it deserves, and there are fewer detractors.

In fact, in the world of investments, although never considered a conservative asset, $BTC is being purchased by institutional investors like never before. However, in the world of cryptocurrencies, Bitcoin is just one coin, and even if it has a spectacular bull market, the price is probably not going to more than 2 or 3x from here.

Potential huge gains on the altcoins

Therefore, many investors have dipped their toes in the altcoin market. This is way further out on the risk curve, but the potential for gains is absolutely massive if you bet on the right ones.

Stories of 20x, 30x, 100x, 1000x abound. With the latter gains, it doesn’t take much of an initial investment to become a millionaire. When the gains are spoken of as “life-changing” the attraction for buying altcoins becomes even greater.

Small cap altcoins can be highly manipulated

However, it needs to be recognized that this altcoin bull market is probably very different from previous ones. For a start, the sheer quantity of different tokens being minted into the market every day has become absolutely staggering. We are talking in the hundreds of thousands.

Trying to pick a winner among that lot is far more difficult than the proverbial needle in a haystack. Even if you manage to pick one that is going to make a few hundred percent gains, the amount of manipulation in the form of pump and dump that goes on here will be very tricky to navigate, and of course liquidity with which to exit can be tough to come by.

Blue chip altcoin - factors to consider

So is it better to back some of the blue chip altcoins? ‘Blue chip’ here refers to altcoins that hopefully have actual use cases. They have a good amount of developers working on them, large market caps, perhaps some decent VC investment, and unlocks that take place after years, rather than weeks. Other factors might also be cited, like a numerous and strong community etc.

However, even among the blue chips, there will be some that will not make it for whatever reason. Even if you look at the US stock market, major stocks that graced the upper echelons of the indices, and that were among the biggest companies in the US, have gone bust, or have faded into obscurity. The same will certainly be true for crypto.

All this said, it can’t be denied that at least for this bull market run, some of the more fundamentally strong altcoins are going to make some great gains. 

Does this mean that you buy them all? Perhaps if you buy the top 50 ranked cryptocurrencies on CoinMarketCap at least some of them should be winners.

Add to winners and cut losers

If you really want to increase your chances of making good investments, it is arguably a good idea to get plenty of advice from a variety of experts on the subject. YouTube has scores of so called ‘influencers’, but you need to be aware that some of these get paid to shill certain coins.

However, by diligently comparing them, you can find those few excellent channels where deep dives into the best altcoins regularly take place, and this information is sometimes given freely.

Finally, it may not be a good idea to buy a selection of the top-ranked cryptocurrencies. The more cryptocurrencies you buy, the greater is the opportunity cost whereby you are taking the losses on weaker altcoins at the expense of your winners.

If you do the homework, you can get your selection down to just a few top-performing altcoins. Always regularly compare your altcoins with $BTC. If they are not beating $BTC, they are not worth keeping. Cut them and add to your winners. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

Investment Disclaimer

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