Bitcoin vs Altcoins

What is bitcoin investment potential, how do investment potentials of the most interesting altcoins differ, and how to determine them… bitcoin investment is thought to be more reliable in the long-term perspective… investor does not have to rely on the altcoin rate dynamics of the last year when forecasting the dynamics of the current year...

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Bitcoin vs Altcoins


2017 was successful both for the bitcoin folders and those, who relied much on altcoins. The altcoin rate increase turned to be better than it could be expected. For those, who do not know what altcoins are. These are all cryptocurrencies except of bitcoin. Sometimes, tokens are also added to this number.

The rise could not be always explained by the real increase in demand. The speculative activities did prevail among the other factors affecting the growth. The important corrections of the end of December and mid of January demonstrate the above. The correction in January did not only initiate a bitcoin price fall but also the rest of altcoins. One the one hand, the fall can be partially explained by the negative news from South Korea and China, where crypto-trading is becoming more and more severely regulated on the governmental level. One the other, bitcoin rate could have been intentionally dropped before bitcoin futures for asset fall monthly realization. However, the overall altcoins market overbought can become rather significant reason for a price fall.

A lot of investors aim to increase their stocks by buying altcoins, which are expected to rise in price in 2018. Nevertheless, there are still a lot of traders considering bitcoin to be the most trusted asset for long-term investments. So, let's consider the potential of both investments, what perspective altcoins are, and how to extract them from the total number.

Bitcoin investment

Bitcoin rate grew up by 20 times in 2017, which is more than anyone could forecasted. However, in some cases, the altcoins rate rise was even greater, growing by 100-200 times and more throughout the year.

Still, while analyzing this phenomenon, it is important to remember that the higher price and cryptocurrency capitalization are, the poorer the growth is because of the statistic “low base effect”. The idea of this effect is whatever the starting point is, one and the same capitalization increase gives the different relative rate growth values. Here is an example. Supposing there is a major altcoin (let it be alfacoin) at the total value of $5 bln. The matter is that its capitalization increase through price growth will be possible under the same efforts and expenses needed for capitalization increase of another pretty unknown altcoin (let it be betacoin) at the total value of $1 bln. Moreover, if alfacoin capitalization was $50 bln, than its rate would increase by 10%. In case with betacoin the situation will be quite different. With the total capitalization of 500 mln USD, capitalization increase by 1 milliard mean that altcoin price will grow by 3 times.

Nowadays, bitcoin is still trusted, holding the leading position among venture investment assets; bitcoin market share makes 34.5%.

Bitcoin can truly be called the inevitable part of the modern society. However, we should consider that the inadequate management of the network carrying capacity issue threatens to decrease the bitcoin perspectives to become “digital gold for the rich” - an asset that can be kept passively, or actively for financial resources transit. Bitcoin is still pretty useless for mass use for daily payments. If the transactions will be as expensive as they are now, bitcoin is likely to become less interesting for the settlement aggregators and people. As a result, bitcoin pricing will be negatively affected.

Nevertheless, bitcoin network is being still scaled. Blockstream company has recently announced about the launch of the micro-transactions processing system based on Lightning Network. Lightning Network is a perspective technology purposed to ensure the work of the “additional” part of the core bitcoin network. The “additional” part is experiencing the super-high carrying capacity for any bitcoin transfers including the smallest.

Though the works over Segregated Witness and Lightning Network have been carrying out for quite a long time already, the projects are not to be realized simultaneously. The Blockstream achievements make believe that its wide application will be realized in the nearest time possible. Read more about the characteristics and mechanism of the bitcoin transactions in the article “Everything about bitcoin transactions”.

Altcoins investment - what to choose?


We have already discussed the reasons and factors affecting cryptocurrency rate dynamics. Still they are important to analyze volatility and make general predictions of the pricing. Another features are important when evaluating the altcoin perspectives, in particular, whether it can or cannot ensure the high investment profit.

When analyzing the altcoins and tokens, the most perspective coins for long-term investment are characterized by:
1. Technically innovative ideas in the core of a coin, current, or future unusual functions of a coin;
2. The coin is provided with a solid financial background to support the prices on the cryptocurrency exchanges and out of them, namely for coin marketing advancement;
3. The team of knowledgeable and all business developers reputable within a cryptocurrency community. The availability of the open initial code of a coin makes it more reliable. Moreover, the altcoin mining opportunity cuts down the risks of rate manipulations typical for tokens with a single emittent - token developer. Thus, altcoin mining has its peculiarities;
4. It is also important to pay attention to the graphs indicating cryptocurrency rates. If the graphs indicate the periodical price increases with a subsequent fall to the initial level, than it means that someone did intentionally “lift” the coin for a specific period of time. However, if the price did finally settled much higher with a rate steadily growing, it suggests the users’ growing interest and/or significant support from the major players.

The number of cryptocurrencies do correspond to all these requirements; a lot of these cryptocurrencies did show the significant progress in pricing last year. Additionally, cryptocurrencies with uncertain potential are likely to rise this year.

What is also important is that an investor has to avoid the mechanical analogies based on the reasoning: “if cryptocurrency rate grew more than by 100 times in 2017, than it seems that it can grow by at least 100 times in 2018”. The realization of this scenario is likely to be damaged by the “low base effect”. That is why it is important to pay attention to capitalization and amount of coins in circulation.

If a trader wants to catch up for, at least,100-times altcoin rate growth, sometimes, it is recommended to buy up every coin in equal amounts from the altcoins list containing 50 most capitalized currencies. After this, a trader needs to keep these altcoins in a safe place for many months till they start growing. This method did prove being effective more than once on the back of the market expansion. Thus, crypto-market majorly grew last year, increasing cryptocurrency capitalization value by 30 times. Nevertheless, its efficiency can significantly go down in future because of the “low base effect” weakness and market growth slowing down.

Thus, before investing in cryptocurrencies, an experienced trader needs to analyze thoroughly the market and its tendencies, develop investment strategy, and choose cryptos for long-term investments. The necessary parameters are listed above. Along with that, a successful trader needs to experience technical analysis (TA) skills. read more about TA in the following articles:
1. “Trade figures – what indicators to choose? Part 1”;
2. “Trade figures – what indicators to choose? Part 2”;
3. “Cryptocurrency price lines of resistance and support”.

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Additional materials that may help you:
IOTA Coin - history, characteristics and facts
Cryptocurrency market capitalization and new opportunities
Place of cryptocurrency in digital economy
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