Rethinking the World Beyond Bitcoin
When I first explored altcoins, I learned that alternative coins simply refers to any cryptocurrency that is not bitcoin. These digital tokens may operate similarly but are built on different blockchain networks. There are thousands of them, each designed with a specific purpose. Stablecoins, for example, are a type that pegs value to another asset like gold or the U.S. dollar, with the goal of stabilizing their price.
Outside of stablecoins, many coins derive value from market demand and traders’ preferences, which makes them vulnerable to rapid, unexpected changes in price. Experts such as James Royal, a Bankrate principal investing and wealth management analyst, often point out that when demand dries up, investors may be left with worthless digital assets supported only by a good story.
This is why staying on the lookout for scams, potential scams, and common types of crypto investment scams matters. Some schemes encourages people to purchase a large amount of a given coin and transfer it directly to a scammer’s wallet. Before you invest, it’s wise to search online the name of the company or person, the cryptocurrency name, along with words like review, scam, or complaint, as advised by the Federal Trade Commission website.
How Meme Coins Really Fit In
Under the umbrella of altcoins are meme coins, which are virtual tokens often created for fun and named after internet memes or pop culture references. While every meme coin is an altcoin, it’s not necessarily true that every altcoin is a meme coin.
In my own experience watching these markets, this corner of cryptocurrency carries risk and is especially treacherous for traders. These assets are among the riskiest because they can emerge from nowhere, offer information that is sparse, and are expected to soar or plummet as public sentiment shifts. A coin may capture the public’s fancy today and be gone tomorrow, as Royal says.
Why Volatility Shapes Every Decision
Overall, cryptocurrency remains volatile and risky. Aside from stablecoins, most cryptocurrencies are not supported by an underlying asset such as gold, commodities, or fiat currencies. Many are only worth what the next trader is willing to pay, which makes them highly volatile and prone to unpredictable price swings.
Even well-established cryptos like bitcoin and ethereum rely heavily on traders’ sentiment and are often driven by sentiment alone. If traders decide a coin is no longer worthwhile, there is no fundamental business to support its price, unlike stocks. Some investors choose to avoid cryptocurrency entirely, while others who are interested in trying your luck in the crypto market may prefer a bitcoin exchange-traded fund.
Coming Back to Bitcoin at the Core
At the center of it all is bitcoin, the original cryptocurrency and the largest by market capitalization, valued at over 1.3 trillion according to CoinMarketCap. It was created by Satoshi Nakamoto, a person, group, or people whose identity remains a mystery.
Bitcoin was envisioned as an alternative to virtual cash, designed to operate without a government or financial institution such as a bank, allowing it to function and facilitate payments independently. It is powered by blockchain technology, using a digital, decentralized ledger that keeps track of transactions across a network. What still stands out is its built-in limited supply of 21 million coins. Once mined, no new coins are issued, creating intentional scarcity by purpose.
This supply limit makes bitcoin a scarce asset, so when demand increases while supply remains the same, its value increases. For some investors, exposure comes through an ETF, an investment fund designed to mimic and track price movement of an asset or basket of assets. These are bought via a brokerage account instead of purchasing and storing bitcoin on a crypto exchange or directly on the blockchain network.
With annual fees that are reasonable and often cheaper, interest from institutional investors can help keep demand robust, while reducing security, fraud, and theft issues that have plagued many exchanges, all while paying lower fees.
