In cryptocurrency, an altcoin is any digital asset that is not Bitcoin. Bitcoin is the first and most well-known cryptocurrency, but many others exist. Some altcoins are similar to Bitcoin, while others offer unique features or advantages. Not all altcoins are created equal. Some are more volatile than others. Luckily, there are a few easy ways to spot volatile altcoins.
Some easy ways to spot volatile altcoins include: looking at the market cap, determining how long the coin has been around, checking trading volume, the team, the community, social media, reviewing the roadmap and announcements, and searching news outlets.
What Are Altcoins?
Altcoins, or alternative cryptocurrencies, are cryptocurrencies other than Bitcoin. The term altcoin was first coined back in 2014. There are 20,268 cryptocurrencies, but not all cryptocurrencies are active or valuable, leaving only around 10,953 active cryptocurrencies.
If you’ve been around cryptocurrency, you have probably heard of the most popular altcoin: Ethereum. Other popular altcoins include Cardano, XRP, BNB, and Solana. While these are some of the best altcoins today, all of them are still susceptible to volatility.
Many altcoins are highly volatile due to little regulation or government backing. They are also much less liquid than other assets such as stocks and precious metals. However, high volatility isn’t bad, as it creates opportunities for high-risk traders to make good money by trading altcoin assets.
What Are Easy Ways to Determine Volatile Altcoins?
- Look at the coin’s market cap. If it has a low market cap, it’s likely more volatile. Altcoins with high market caps are usually safer investments with less volatility. A rule of thumb is to look at the coin’s price over a period of months or even years. Longer time-frames provide a clearer picture of the coin’s volatility.
- Check how long the coin has been around. Coins that have been around for long periods are less volatile. Coins that have only been around for a few months will likely be too new to be non-volatile.
- Check the coin’s trading volume. If it has a high volume, then it’s less volatile. If it has a low volume, the price will likely fluctuate often.
- Check the coin’s team and advisors. Look for a strong team with a proven track record of success in the blockchain industry. Coins with reputable teams and advisors make the coin less volatile.
- Check the coin’s community and social media. What are people saying about it? The more positive sentiment a coin has, the less volatility. Social media can be used to gauge the coin’s popularity. The more popular a coin is, the less volatile it’s likely to be. Check the coin’s website and social media accounts. Are they professional and updated regularly?
- Check the coin’s announcements, roadmap, and white paper. If it has a clear plan to implement, then it’s less volatile. Check the coin’s white paper for detailed information about the project. Is it a well-written document? Are there any legal issues? Does it have any technical jargon that is easy to understand? The coin will likely be less volatile if the white paper and roadmap are clear.
- Check the news. What’s happening with the altcoin? Is it getting a lot of attention? Is the price rising?
Examples of Volatile Altcoins
- Bitcoin Cash (BCH). Between August through December 2017, BCH surged from $400 to over $3,900. It fell back to $2,000 by mid-January 2018.
- Binance Coin (BNB). Between January through May 2021, BNB went from under $45 to over $622. It fell back down to $262 by May 2021.
- Bitcoin Gold (BTG). Between October through December 2017, BTG went from under $119 to over $500 before falling below $100 by February 5, 2018.
- Neo (NEO). Between January through April 2021, the price of NEO rose from just under $16 to over $118. It dropped to under $32 by June 20th, 2021.
- Fantom (FTM). Between July through October 2021, the price of FTM rose from $.19 to over $3 before falling below $.30 by mid-May 2022.
Where to Buy Altcoins
Altcoins can be purchased from cryptocurrency exchanges. But before that, you need to open an account and pass the verification procedure. The top three exchanges are Binance, FTX, and Coinbase. Each exchange has different requirements for verification, so it’s best to check out their websites for more information. Most exchanges work with fiat currency (dollars, euros, etc.), and some allow buying altcoins using other cryptocurrencies.
Conclusion
Always do your own research before investing in any altcoin. If searching for altcoins with less volatility, look for red flags like a lack of a roadmap, no clear use case, or an anonymous team. If an altcoin meets these and any other criteria listed above, it is likely very volatile. High volatility can also mean higher rewards, so only invest in these altcoins understanding the risks.
Click here to learn about Polkadot, the altcoin that can dethrone Bitcoin.
References
https://explodingtopics.com/blog/number-of-cryptocurrencies
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