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While Bitcoin remains the cornerstone of crypto, alternative coins, or “altcoins,” are sparking investor interest. Some investors anticipate “altseason," a period where select altcoin prices significantly increase and outperform Bitcoin.
Though altseason has not yet arrived, a rising altcoin season index demonstrates momentum and increasing investor confidence. Once 75% of the top altcoins surpass Bitcoin's market performance for a set period, altseason is considered underway, and investors can potentially realize large returns.
For investors seeking portfolio diversification and alpha generation through decentralized finance (DeFi), altcoins can present attractive opportunities. However, altcoins have shown to be highly volatile, typically even more so than Bitcoin. Robust data analytics are needed to assess and manage risks diligently when investing in altcoins or any digital asset.
Understanding the Different Types of Crypto Altcoins
Developers design altcoins for specific blockchains, often to offer new capabilities or improvements. Many altcoins are forks, creating an independent blockchain from a preexisting one. For example, Litecoin is a fork of Bitcoin. It offers faster block generation than Bitcoin, accelerating transaction confirmations.
Some altcoins are tokens that operate on existing blockchains. Tether, for instance, is widely used on the Ethereum blockchain.
There are various types of altcoins, including:
- Stablecoins: Offer lower volatility due to being pegged to another asset, like the USD. Tether is the most widely used stablecoin.
- Utility tokens: Enable the use of a specific functionality or product on a blockchain. Binance Coin is an example of a utility token offering multiple functions, like granting users access to discounted fees.
- Governance tokens: Grant holders voting rights regarding on-chain decision-making. Uniswap is one of the top governance tokens by market capitalization.
- Payment tokens: Facilitate transactions and can be used similarly to traditional currencies. Litecoin, for example, is a payment token created to support faster payments and lower fees.
- Memecoins: Stem from a meme or trend and generate a following and subsequent market value. Dogecoin is an example of a popular memecoin.
Crypto Altcoins With High Growth Potential
Different factors indicate whether an altcoin has high growth potential, namely, whether it offers real value, like solving user challenges, and if there's a demand for it. Though all altcoins carry risks, some of today's top-performing contenders include:
- Ethereum (ETH)
- Binance Coin (BNB)
- Polkadot (DOT)
- Litecoin (LTC)
- Solana (SOL)
- TRON (TRX)
- Cardano (ADA)
- Monero (XMR)
- Ripple (XRP)
- Chainlink (LINK)
- Avalanche (AVAX)
Are Altcoins Worth Investing In?
Altcoins can be worth investing in for those with a higher risk tolerance and seeking greater portfolio diversification, alpha generation, and access to emerging technologies. That said, due to altcoins' high volatility and lower liquidity, alpha generation hinges upon comprehensive risk management, which may be achieved through data analytics and due diligence.
Why Trust Amberdata?
Amberdata is the leading provider of high-quality, low-latency cryptocurrency data for financial professionals. We purpose-built our data and analytics solutions to address investor pain points, such as liquidity fragmentation and operational complexities. By aggregating and analyzing real-time and historical market data from multiple decentralized and centralized exchanges, we deliver easy-to-digest insights and provide the data infrastructure to empower investment decision-making and simplify risk management.
Assessing the Risks and Analyzing Potential Returns With Amberdata
Allocating capital to altcoins can be a strategic move toward higher returns, but it can also increase risk exposure and lead to drawdowns without access to actionable crypto market data. Make the move confidently with Amberdata.
Our enterprise data solutions bring all the data and analytics you need to assess altcoin investment risks and analyze potential returns, from liquidity data to real-time on-chain transaction insights. Schedule a demo today and discover why institutional investors trust our solutions for easier and more informed investment decision-making.
