All too often, people that are involved with cryptocurrencies tout the money they have made off altcoins, rather than Bitcoin itself. But in this very turbulent period, it begs the question of which is better: Bitcoin or the altcoins. Especially with a growing political landscape getting involved with cryptos, it’s important to understand the big differences between these and the risks associated.
The Multi-Level Risk With Altcoins
First off, it’s important to understand that altcoins have a lot more risk than Bitcoin and a couple others (like Ethereum and Litecoin). The reason for this is fairly simple: almost every coin relies on Bitcoin for entering and exiting. What this means is that, for example, let’s look at Dogecoin:
- If Dogecoin loses confidence, people dump it
- If Bitcoin loses confidence, people start exiting Dogecoin
Furthermore, what would happen if exchanges for Dogecoin shut down? You wouldn’t be able to get them anymore. And if Bitcoin/fiat exchanges went under, you would still have a hard time getting Dogecoin.
This isn’t to say that these situations will occur, but rather that it’s imperative to realize that most altcoins are entirely dependent on Bitcoin and its landscape for survival.
Altcoins are Created Daily – Many With Unlimited Supply
Most altcoins don’t have a supply cap, something that Bitcoin (with its cap of 21 million) has capitalized on from the beginning. Dogecoin, for example, will create limitless coins, as will Ethereum. It’s true that their creation will slow down as the years go on, but the important thing to note is that there is no hard cap. On the other hand, Bitcoin will never have more than 21 million coins. So if you are slowly building up a stash, you are constantly increasing your position relative to the total number of coins.
Some argue that the hard cap on supply is a bad thing, and that is an entire discussion in and of itself. Most, however, do like the idea of knowing that they won’t be diluted as time goes on even if they are holding the same number of coins long-term.
Bitcoin Has the Best Backing
Bitcoin is considered as the “digital gold,” and it has the strongest backing. Whether you’re looking at the number of services and merchants that accept it, the number of exchanges, trade volume, or political backing, the simple fact is that Bitcoin is absolutely the king. Some, like Ethereum, are also backed by companies through things like the Enterprise Ethereum Alliance, but even that doesn’t have nearly as strong of a backing as Bitcoin itself does. As part of this, it also has the most secure network, by far, with the cost of doing things like a 51% attack being multitudes higher than with any other coin.
Can Altcoins Still be Profitable?
This is a definite “yes,” but the key is to be sure that you know what you’re digging into before doing it. There are numerous scams out there and coins that have little backers. While these could still blow up in popularity and bring about massive gains, the vast majority are going to flop and take all your money with them. Full research into coins before getting involved is important, and you want to learn things like their community size (adoption is a main driver of their price) and the developers behind them. While some may be anonymous, it’s important to know what their skillsets are and what they’ve done in the past. This is how they set track records, and knowing those can help determine whether or not it’s worth the risk of jumping into a new coin with some funds. But never get caught up in FOMO (fear of missing out)!
Disclaimer: Do not make any investments based on this article. Bitcoin is risky, like any other asset, and we do not know your personal finance situation. Do due diligence and only invest what you can afford to lose.