What is an altcoin?
Simply put, an altcoin is a cryptocurrency that is not Bitcoin, or otherwise known as, the “king” that governs them all! Jokes aside, are altcoins really profitable? Should you trade altcoins? Let’s take a look.
Why should you be interested?
The old adage “You should never put all your eggs in one basket” rings true for crypto traders and investors. For the purpose of diversification, if you split up your portfolio between Bitcoin and altcoins, you will be hedging against risk.
On the other hand, even though the price of Bitcoin usually sets the tone of the market, altcoins often offer larger capital gains in times of market upswings.
Indeed, the capitalization and dominance of bitcoin is huge compared to the rest of the market and it will be much more difficult for Bitcoin to make a 100% gain compared to a small coin.
Top 3 Altcoins for 2021
We are not a fan of cherry picking (choosing coins that will increase the most for the sake of building a crypto portfolio with 50 different random projects as we saw in 2017) but we understand you might be keen on this topic given the impending altcoin season so here we go!
Ethereum / Market cap: $67 512 453 541 USD
It’s no surprise that ETH made it to our list of top three altcoins for 2021 given the upcoming launch of Ethereum 2.0. We are all excited for the wait for the launch to come to an end!
For newcomers, Ethereum is a blockchain which has the capability to allow “smart contracts” (it’s not the only one for a long time, we’ll come back to that in a later article). To simplify things, it means the possibility to program an application on the blockchain and it is the most used in that respect.
Given the high usage, it naturally resulted in clutter and this can lead to huge transaction fees. The problem with ETH is its scalability and even if this problem will not be resolved immediately with the release of ETH 2.0 on December 1st, 2020, it remains an excellent choice of altcoin for the year 2021.
Cardano / Market cap : $5 140 865 718 USD
Cardano is also one of the projects that we would hold in the longer term. It’s also a coin that has the capability to allow smart contracts on its blockchain, but this is not yet available.
Cardano’s roadmap is divided into 5 eras: Byron, Shelley, Goguen, Basho and Voltaire. We are currently in the Shelley era and the next one, Goguen, which should include the launch of the smart contracts.
Why is Cardano included in the list? According to Charles Hoskinson, founder of Cardano and co-founder of Ethereum, it was announced in August of this year that Cardano will be introducing smart contracts this year. Along with that, he also announced that a huge news story would be announced before the end of this year. Hence, we are positive that this project has a lot for room for growth.
FTX Token / Market cap: $407 938 685 USD
For the third and last coin, we will turn to FTT, the FTX ecosystem utility token. We wrote an article on the FTX trading platform previously and we believe that this token has a big potential for growth given that FTX is one of the most robust and liquid exchanges in the market.
How can I start trading altcoin?
Now that you know our top three altcoin picks for 2021, let’s take a look at how you can buy them.
To trade altcoins, it is exactly the same procedure as to trade Bitcoin. You’ll start by opening an account on the trading platform of your choice. We recommend Binance for spot trading and FTX for margin trading.
If you prefer to delegate trading decisions, you can also try the 4C Trading’s Smart Margin bot which will open and close positions for you without you having to move a finger.
How to get the most profit out of trading altcoins?
This depends on your investment horizon, and your level of trading. If you are a beginner and have followed our recommendations, it will be more difficult for you to make large profits on a single trade.
When you start trading, it is important to set up stop-losses and take-profits and not to touch them afterwards. The succession of trades with a sufficient success rate will bring you profits.
Long-term trend trader
If you are more of a trend trader, with a system based on moving averages and price structure for example, then the best way to capture as much profit as possible will be to control your emotions and gradually build up your stop-loss until you are out of the market.
Difference between a stablecoin and an altcoin?
We all remember our elementary math classes where we learned that a square is a rectangle but a rectangle is not a square! Well it’s a bit the same logic here.
Indeed, a stablecoin such as Tether is a different crypto than Bitcoin, which makes it an altcoin. However, the basis of a stablecoin is to replicate the value of another asset or currency, in this case the USD.
However, for the vast majority of altcoins available on the market, this is not their purpose. We can therefore affirm that a stablecoin is an altcoin but that an altcoin is not a stablecoin.