What are Altcoins?
After Bitcoin was born in 2009, marking a major turning point in the beginning of the blockchain revolution, as the first virtual currency, Bitcoin inevitably has shortcomings such as slow transaction time, limited amount of BTC, transaction anonymity… That’s why other virtual currencies (altcoins) were born to fill these weaknesses of BTC. Altcoin is a collective name for other virtual currencies (cryptocurrencies) other than Bitcoin.
What prompted the emergence of altcoins?
As noted above, Altcoin is an alternative to Bitcoin because it improves the disadvantages of Bitcoin. In addition, many types are trying to compete to surpass Bitcoin, such as comparison of transaction anonymity, Bitcoin has some formidable competitors such as: Monero, Dash, Zcash, Namecoin …
Equally important is transaction time, coins like Litecoin and Fastcoin have improved the block update times that were once a drawback of Bitcoin. So when it comes to commercial value, these coins process transactions faster, so they always have an advantage. However, no Altcoin is perfect without any negative points, which can be strong in one aspect but weak in another. There is nothing to end this competition as it promotes the ever-growing cryptocurrency ecosystem to meet the different needs of its users.
The Benefits and Drawbacks of Altcoins
Any coin when it is born has its own advantages and disadvantages, Altcoin is no exception. Recognizing the advantages and disadvantages of this coin, users can take advantage of the advantages and limit the disadvantages to optimize the transaction process.
Advantages of Altcoins:
The advantages of Altcoins can be mentioned as:
- The advent of countless coins makes the cryptocurrency market more and more exciting. At the same time, it also makes the decentralization of the cryptocurrency community more and more obvious. It is that competition that creates opportunities for investors who want to make money from crypto.
- The birth of Altcoins overcomes many limitations of Bitcoin such as: faster transaction speed, more scientific way of distributing and processing algorithms…
Disadvantages of Altcoins
Although there are many advantages, there are still disadvantages to Altcoins that need to be overcome as follows:
- The first downside of Altcoins comes from the big “sharks” in the industry. These investors proceed to inject a large amount of money into low-value Altcoins to push the price of this coin up and then sell it for a large profit.
- Altcoins only exist on the market for a relatively short time
- There are many types of Altcoins that have no practical, unnecessary application. These types of Altcoins are the opportunity for fraudulent activities to increase rapidly.
Relationship between Bitcoin and Altcoin
Basically, Altcoins are often paired with Bitcoin into trading pairs on cryptocurrency exchanges. We can exchange Bitcoin for most Altcoins. That is why prices between Bitcoin and Altcoins have a rather special relationship. When Bitcoin falls, many Altcoins also fall.
But when Bitcoin goes up, it is likely that some other cryptocurrencies will also increase, but it is also possible that the majority of other Altcoins will fall as Bitcoin sucks the capital of the entire market.
However, now Bitcoin no longer plays an exclusive role in exchanging with Altcoins, but many other coins such as ETH, BNB, EOS … And stablecoins such as USDT, USDC.
Should you invest in Altcoins?
Is it a good idea to invest in altcoins? When it comes to cryptocurrencies, this is most likely the question that many people have.
Of course, the answer is yes. When investing in cryptocurrencies such as Altcoins, however, you must have a complete awareness of the features of each form of Altcoin, the organization from which it was founded, and the currency’s prospective development. At the same time, in order to earn from this investing activity, you must develop solid market analysis abilities.
Signs that Altcoin Season is coming:
After many times observing the Bitcoin season, I have concluded that there are two prerequisites to help you realize whether the Altcoin season has come or not, which are:
- Bitcoin Dominance must DOWN.
- Cash flow must shift to Altcoins.
- Market Cap for cryptocurrencies increases.
Bitcoin Dominance Decrease:
Bitcoin Dominance aka Bitcoin’s market capitalization dominance rate in the cryptocurrency market.
When the daily rate increases, it shows that investors are tending to hold Bitcoin rather than Altcoins, so Altcoins will tend to decrease because investors sell Altcoins to BTC.
When this ratio tends to decrease, there will be two cases:
– Investors are tending to sell BTC to USD or USDT.
– Investors are tending to sell BTC to invest, buy into Altcoins.
Therefore, a decreasing Bitcoin Dominance rate is considered a necessary condition for an Altcoin season.
Cash flow must shift to Altcoin
According to my observations, there will be three scenarios of capital movement in the cryptocurrency market. Including:
Scenario 01: BTC » Altcoin Top » Mid-cap/LowCap (most common).
Scenario 02: Mid Cap/Low Cap » Top Altcoin » BTC.
Scenario 03: This is the most delicious and ideal scenario, only happens when there is a large capital inflow into the market.
At this time, if you close your eyes and buy big, you will also be profitable because too much capital will flow to every corner of the market. From BTC to Altcoin and low cap will pump very very strongly.
Market Cap for cryptocurrencies increases:
If only the Bitcoin Dominance Index (Bitcoin Dominance) goes down but the total market capitalization does not increase, this can be a “fake signal” for Altcoins Season, vice versa if the Market Cap goes up and the Bitcoin dominance index ( Bitcoin Dominance) still doesn’t drop then it’s not considered Altcoins season either. These two factors must appear together to be considered a sign of an Altcoins purchase. However, this is only a relative division, the market is not required to follow this rule.