Altcoin Trading for Beginners
Altcoin Trading for Beginners
Cryptocurrency trading is still in its infancy and as a result, there are opportunities for savvy — and lucky — investors to see substantial returns. However, as with any new market, altcoin trading is unpredictable. Educating yourself about the opportunities that are available, and their pros and cons, is part of due diligence. In this article, we look at basic altcoin trading strategies and offer a few tips for investing wisely.
Altcoin vs. Bitcoin
Bitcoin is the largest and best-known cryptocurrency, but it’s not the only option out there for investors. In fact, Bitcoin’s popularity places it out of reach of most casual traders. With one BTC currently worth more than $7,000 as of November 1, 2017, investing in Bitcoin isn’t an option for many.
Enter altcoin. An altcoin is any cryptocurrency that isn’t Bitcoin. The market is currently flooded with altcoins. CoinMarketCap, one of the most currency trackers, lists more than 1,200 actively trading altcoin. Many of these sell for far less than Bitcoin, making them more accessible to investors without a significant amount of initial capital to spend.
Investing in Altcoins
A currency needs users to be sustainable. Successfully investing in altcoin requires anticipating what the next big thing will be. Many altcoins debut to considerable amounts of hype, only to slowly lose value following their initial coin offering (ICO).
That being said, it’s not uncommon for altcoin to exhibit volatility after its initial release. And while a new coin has the potential for significant gains, investors who want to minimize risk will look to more established altcoin or to those that are backed by a stable Bitcoin reserve.
How to Trade Altcoins
Not all investors purchase altcoin for their long-term potential. Trading altcoin is like short-selling any investment product — if done smartly, it can yield significant rewards quickly. While there is always an element of luck in this, following a few basic rules will help you improve your chances of turning a profit:
- Do your research: Don’t invest in a new altcoin without a thorough understanding of how it works and how it’s being managed. Look beyond the numbers and read up on what makes it different from competing products.
- Follow the news: Staying up to date on the latest trends and developments will help you anticipate what the next big ICO will be. Ultimately, while hype isn’t everything, it does play a significant role in the market.
- Watch BTC for clues: When Bitcoin gains in value, altcoins tend to drop, and vice-versa. Watching the day-to-day performance of BTC can give you an insight into the broader trends affecting altcoin in general.
- Minimize risk through diversity: Altcoin trading should make up a small percentage of your overall portfolio. As tempting as it may be to go all-in on a hot ICO, smart investors always hold the majority of their money in stable, traditional investments.
Though the altcoin marketplace can be intimidating, ultimately it is governed by the same forces and rules as traditional investments. Keep exploring our blog to learn more about cryptocurrency trading for beginners and the potential for investors and end users alike.