As the global economy continues to limp, you may be among the investors wondering if the best investments are in currencies that are not tied to any economic authority but are easily accessible to anyone with a digital wallet. If cryptocurrencies are an acceptable and responsible addition to your investment portfolio, how can you make sense of all the options and increase your chances of trading your crypto for a profit? Beginning with an explanation of the nature of cryptocurrencies and the most popular altcoin options to Australian investors, this guide will offer insights you need to feel confident diversifying your portfolio to include cryptocurrencies beyond Bitcoin that can add to your wealth.
What Are Cryptocurrencies?
As a quick recap, cryptocurrencies refer to any monies stored in a digital wallet and not verified or maintained by a centralised authority. Using coding and blockchain technologies, these digital assets can be used to complete transactions through payment systems that accept them. Cryptocurrencies are not required to have any physical assets backing them or establishing their value, so their worth in Australian dollars can fluctuate.
Bitcoin Dominates the Market
Bitcoin was the first cryptocurrency to become a household name across the globe. Because it was innovative and captured people’s imagination, it quickly became a buzzy conversation piece since its introduction in 2008. Its rise in popularity may have been tied to recessions across the Western world that left many people disillusioned with money backed by central authorities. Between the timing of its establishment, its relatively uninhibited growth cycle, and the lack of popular competitors, Bitcoin became the most popular cryptocurrency. However, being first and most popular does not inherently result in a superior product, so many Australians have kept their options open for other opportunities to invest in crypto.
The Rise of Altcoins
Although Bitcoin paved the way for cryptocurrencies to one day become mainstream monies, the future of crypto will be enhanced by the innovation and designs accompanying a competitive market. Specific altcoins, or alternative digital assets besides Bitcoin, effectively tackle challenges in the crypto market and provide security and variety to potential investors. Some altcoins see their value diminish quickly, but others have maintained their purchasing power to become popular digital asset options. As more and more altcoin technologies become available, the organisations that create them push each other to reach new heights in security and value.
Why Consider Investing in Altcoins?
Some altcoins have established a base that provides relative security, making them an ideal addition to a well-rounded investment portfolio, and other altcoins take advantage of their volatility to offer investors a chance to buy and sell their currency with major gains in view. Although cryptocurrencies are notoriously risky, you can build your confidence in your ability to evaluate the value of an altcoin and potentially see its value and volatility work for you.
Understanding Altcoins: Evaluating Value for Investment
How well an altcoin performs for investment can be unpredictable, but some features indicate that an altcoin investment is a good idea. When creating your cryptocurrency portfolio, consider balancing these three key attributes:
Popularity
When it comes to altcoins, popularity matters because the value of a cryptocurrency is established mainly by how many users are actively trading and advertising a particular coin. A more popular choice will inherently be less likely to deliver a high-loss investment. Popularity also determines how many people will be interested in buying and selling the coin, resulting in a more competitive market, which may influence whether a short-term gain is feasible or if your investment is better suited to a longer-term waiting game. Crypto prices can be affected by popularity and advertisements, making this one of the most essential features to consider when buying into an altcoin market.
Security
Particularly when buying and selling altcoins, you want to protect your wealth. While you cannot completely control the market value, your due diligence before adding an altcoin to your portfolio can protect you from losing money to an altcoin scam or a less effective blockchain technology that invites theft. While the cryptocurrency market offers some security guarantees you are working with, ultimately, the value of your investments can be directly influenced by the altcoin provider’s security. Therefore, this feature should be carefully weighed when deciding which coins deserve attention.
Diversity
A good cryptocurrency investment portfolio will be defined by diversity. Don’t limit yourself to currently popular cryptocurrencies, and don’t discount the long-term benefits of working with established altcoin providers. Do let the goal of a diverse portfolio guide your decisions when investing in any crypto organisation, particularly altcoins.
Overview of Popular Altcoins
With a view of letting popularity, security, and diversity direct your investment strategy in altcoins, let’s examine some of the other crypto options that attract investors such as:
- Ethereum
- Cardano
- Dogecoin
Ethereum – Capitalising on the ubiquitous nature of the internet, Ethereum manages the digital assets labelled ETH in Australian markets and promotes its product as an excellent choice for crypto investors. It promotes its product as a global and indiscriminate digital asset that is securely traded in legitimate markets. Ethereum leans into the possibilities available to NFT purchasing by asserting that the digital market can “tokenise” various assets and put spending power into people anywhere with access to the internet.
After Bitcoin, Ethereum consistently attracts more investors than any other altcoin. Offered at a cheaper rate than Bitcoin and with a growing digital popularity, investing in Ethereum allows you to trade in a cryptocurrency on established trading platforms while using less capital in your initial investment.
Cardano – Cardano boasts its value by appealing to people who appreciate peer-reviewed research and tried-and-tweaked technologies to create a cryptocurrency they desire to be viewed as trustworthy and working for the global good. The added verifications and peer-review protocols add a level of security other altcoins do not promise, and it believes its scalability will enable it to keep up in the altcoin market.
Dogecoin – Dogecoin sets itself apart from investors by appealing to a sense you don’t often associate with cryptocurrency: cuteness. As a digital currency, its popularity fluctuates as much as its varied community base. However, it still works to build a secure asset based on blockchain technology that can be traded peer-to-peer. Because its coins are available at a low price and its site and trade are ascetically pleasing, Australian investors may choose this altcoin as a good bet. They can feel confident this cute crypto is protected by legitimate blockchain.
Risks of Investing in Altcoins
Smart investors should remain alert to the risks that investing in altcoins may invite. Every altcoin investment carries some risk because of the volatility associated with decentralised financial institutions. Carefully consider the following risks when developing your cryptocurrency investment strategy:
Altcoin value can change rapidly
The biggest risk in all cryptocurrency investing is that digital assets are notoriously volatile. Your tangible money assets can quickly become worthless if they are traded at the wrong time into a cryptocurrency that cannot maintain its value until you sell.
Altcoins may not have the infrastructure to scale up to a high investment yield
While digital assets are stored in digital wallets that have virtually limitless storage, the decentralised organisations that create and maintain the coins must be able to accommodate the transactions that become part of the blockchain. Newer companies that cannot scale up their coding and organisational structures may need help to continue managing the value of their digital assets, resulting in a loss on your investment.
Scammers may try to take advantage of an altcoin’s popularity
Because altcoins are part of decentralised financial organisations, they are not regulated like your standard currency. It could be easy for a confusing email or spoofed website to trick an investor into believing they are dealing with their intended market while transferring centralised funds such as real dollars to scammers.
More than many other types of investment, investing in cryptocurrencies, and particular altcoins, allows for the possibility of loss of your real or physical assets. However, as the global economy continues to move towards decentralised financial institutions, it is worth evaluating the risks of individual altcoins so you can learn how these markets work and how they can work for you.
Increase Your Chances of Successful Investment
While investing in cryptocurrencies and altcoins carries the risk of loss, it also contains exciting potential for a well-informed investor. You can create a diverse and valuable portfolio with the help of a seasoned financial advisor, and we are ready to help you make sense of your current financial situation and establish your financial goals with savvy investments across various possibilities. Talk to us about your altcoin curiosities, we look forward to discussing your financial future soon.
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