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7 Reasons Altcoins Are Gaining on Bitcoin

7 Reasons Altcoins Are Gaining on Bitcoin
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Why altcoins win over bitcoin. Altcoins are alternatives to the king of the cryptocurrency, Bitcoin (BTC), and as a cryptocurrency market cap…

Why altcoins win over bitcoin.

Altcoins are alternatives to the king of the cryptocurrency, Bitcoin (BTC), and as the cryptocurrency market cap has reached new heights, these alternative currencies are dwindling in Bitcoin’s market share. Of the $2 trillion global cryptocurrency market cap, bitcoin had a market share of 39% as of January 14, down from about 70% from this time last year, according to TradingView. In other words, altcoins currently make up more than 60% of the cryptocurrency market. The runner-up in Bitcoin, ETH (ETH) from the Ethereum blockchain, takes a portion of the market share and stands at 19%, but it is the smaller altcoins that pose a greater threat to Bitcoin’s long-term dominance as more investors try to find the next big coin that might rise. New cryptocurrencies such as Cardano (ADA), Avalanche (AVAX), Ripple (XRP), and Polkadot (DOT) are on the rise, promoting more functionality than Bitcoin. Investors who want to participate in this growth will need to understand why the altcoins are gaining ground with bitcoin. Here are seven reasons why underdogs make their day.

The uses of cryptocurrency are expanding.

Many altcoins are not just cryptocurrencies, but their technology can be harnessed for other uses. Blockchain technology opens the door to a variety of important applications for various industries, including peer-to-peer financial platforms, automation, building trust around transactions and providing greater access to credit. These use cases, which have nothing to do with Bitcoin, are “finally being recognized and (verified) having a meaningful adoption,” says Clayton Gardner, co-founder and co-CEO of Titan, a crypto investment platform. Gardner says altcoins are winning over bitcoin because the industry tends toward “different crypto sectors with different value drivers such as smart contract platforms, DeFi (decentralized finance), NFTs (non-decryptable tokens), play-to-earn games, distributed storage platforms, etc.” These applications are fundamental to developing new ways for consumers and businesses to interact digitally and manage operations.

Institutional investment in alternative currencies is increasing.

Digital assets are gaining traction among institutional investors. Since these large investors tend to have more money to invest and may be able to take on more risk than the average investor, they are able to invest in speculative assets, and greater interest has followed. “Institutional capital also goes beyond the simple binary question of ‘exposure to crypto or not’ and to ‘where should I invest in crypto?’” Gardner says. With the proliferation of cryptocurrency, institutional investors are recognizing the value of the blockchain across market segments. Alternative digital currencies are set to benefit from this trend, Gardner says, which “potentially represents one of the biggest shifts in the technology paradigm over the next decade.”

The basics of investing in cryptocurrencies are changing.

Each cryptocurrency has its own protocol, which can be considered as the network’s working rules. Bitcoin has a cryptographic protocol where users buy and sell Bitcoin through digitally signed encrypted messages. Each altcoin has its own protocol that defines the structure of the blockchain. The more users and activity on a particular protocol, the higher the value of the cryptocurrency. Cryptocurrencies with strong use cases can mean that they have strong fundamentals that may be able to withstand the massive competition in the cryptocurrency market. “Cryptocurrencies are in the midst of crossing the chasm — from a macro/speculative asset class — to an increasingly fundamentals-driven class,” Gardner says. Crypto functions that have a sound infrastructure on their blockchain may lead to greater adoption. “Investors are increasingly looking at the actual usage, economic models of the underlying tokens and their unique growth drivers,” he explains.

Altcoins are cheaper than bitcoin.

Bitcoin was around $43,000 as of January 14 and was trading as high as $60,000. Many altcoins are much cheaper, and therefore easily accessible to individual investors. As cryptocurrencies continue to grow in popularity, investors are looking for new low-priced alternative coins as they offer maximum upside potential. “Altcoins provide a convenient entry point and opportunity for asymmetric risk,” where the upside potential of cheap investment is much greater than the downside risk to zero, says Rodrigo Vicona, chief financial officer at Prime Trust, a provider of financial infrastructure for fintech and asset innovators. digital. “Like a lot of fractional stocks,” he explains, “digital currencies can offer a more acceptable price point to first-time or mainstream consumers without feeling like you’re only getting part of the action.” For example, Litecoin (LTC) is much cheaper than Bitcoin, and its price fluctuated from around $4 in January 2017 to $347 in May 2021 and to its current price of around $136, still a huge gain from the initial investment five years ago.

Altcoin season may be approaching.

The term “Altcoin season” refers to altcoins gaining momentum that could challenge Bitcoin’s dominance, with one or more altcoins eventually overtaking Bitcoin. This “volatility” is inevitable, says Ron Levy, co-founder and CEO of Crypto Company. Bitcoin is a cryptocurrency with a strong use case, but there are a large number of digital currencies that serve many different purposes. “It’s not just Ethereum; now there are several thousand (altcoins) coming in,” he says. Levy cites DeFi, gaming, and the metaverse as opportunities that will allow altcoins to continue gaining market value.

Altcoins are constantly innovating.

Altcoins can take advantage of the shortcomings of Bitcoin. Ethereum, for example, allows for multiple functions in the blockchain infrastructure, such as automation and broader interaction with the network. The alternative currency, XRP, mines its coins in a much simpler way than Bitcoin. Solana (SOL) was created to provide a more scalable and secure software at a lower cost compared to Bitcoin and Ethereum. Experts say that the creation of new altcoins that offer solutions to existing crypto and blockchain limitations will inevitably affect the demand for Bitcoin.

Alternative currencies can be used to manage risk.

The most common reason for trading altcoins is the possibility of a higher return on investment in the short term. But experts say that altcoin investors can use tokens to manage their risks because some of the coins or projects that are cheap do not require large investments. To preserve profits while minimizing risk, Vicuna says, “look at assets that are gaining a foothold in areas such as the metaverse and GameFi or launch separate chains to automate and reward users who will support the chain with continued investments despite what is happening to Bitcoin and the market.” Levy says that the greatest use of Altcoins for risk mitigation is for investors with a longer time horizon. “If you’re looking to get in and out there’s a place in the market for that, but if you’re investing your valuable savings (and) if you do your research, put it in for a while and leave if you have a time frame to wait,” says Levy.

7 reasons why altcoins are gaining from Bitcoin:

The uses of cryptocurrency are expanding.

Institutional investment in alternative currencies is increasing.

The basics of investing in cryptocurrencies are changing.

Altcoins are cheaper than Bitcoin.

Altcoin season may be approaching.

Altcoins are constantly innovating.

Alternative currencies can be used to manage risk.

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7 Reasons Why Altcoins Earn Over Bitcoin Originally appeared usnews.com

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