Should You Invest in Bitcoin, Altcoins, or Stablecoins?

Many individuals who enter the crypto market typically have one coin in mind: Bitcoin. However, these investors are missing out if they put all of their attention on Bitcoin alone. After all, while Bitcoin introduced the concept of blockchain and decentralized finance on a massive scale, it is not the only coin in the market that you can invest in. For example, users who prioritize privacy should consider Monero for secured transactions, using a specialized Monero wallet.

In this article, there are two other important types of coins that you should consider investing in: altcoins and stablecoins. Continue reading below for a quick guide that you can use to determine which coin is best for your portfolio.

What Is Bitcoin?

Bitcoin is the first cryptocurrency in the world and was first released as an open-source software in 2009. Bitcoin revolutionized the concept of finance by focusing on the idea of decentralization and advocating for a peer-to-peer system without a third-party intermediary (e.g. banks, government).

Pros of Investing in Bitcoin

• Widest Support – Bitcoin has the largest user base in the crypto market with more than 81 million users worldwide.
• Use Outside of Crypto – Popular brands and companies have started to accept Bitcoin as a means of payment, including Paypal, Microsoft, and Starbucks.
• Healthy Track Record – As the first digital coin, Bitcoin has an extensive history to show investors that it is a trustworthy cryptocurrency and is more likely to stand the test of time.

Cons of Investing in Bitcoin

• Slow Transaction Speeds – It takes around one hour to fully confirm a transaction in Bitcoin compared to other more efficient altcoins. For comparison, an altcoin like Monero only takes around 20 minutes to fully confirm a transaction.
• High Energy Consumption – Bitcoin’s PoW (proof-of-work) system uses a lot of energy, which can become a scalability issue in the long run.
• Not Completely Anonymous – Bitcoin does not guarantee full anonymity because it is possible to track coins, sellers, and receivers by checking the blockchain, which is considered a public ledger that can be easily accessed by anyone.

What Are Altcoins?

Altcoin is a combination of two words: alternative and coins. It is the encompassing term used to describe the large bulk of digital coins in the market, even though they, as a whole, only comprise less than half of the crypto industry’s total market capitalization.

All altcoins are inspired by Bitcoin, and they also use the same blockchain technology. However, altcoins differentiate themselves by providing new functions or developing more efficient systems that address Bitcoin’s shortcomings.

Overall, the entirety of altcoins is so big that there are several types of coins that fall under it. They include security tokens, mining-based coins, meme coins, and stablecoins (which will be discussed later on).

Pros of Investing in Altcoins

• Faster, Cheaper Transactions – Compared to Bitcoin, altcoins transactions are faster and cheaper.
• Affordability – Prices of altcoins are significantly more affordable than the two biggest cryptocurrencies, Bitcoin and Ethereum ($39,000 and $2,900 respectively, as of the time of writing). This makes crypto more accessible to new traders.
• Diversification – Portfolio diversification is integral in any investment strategy and allows you to have a backup in case something happens to your other ventures.
• Value Increase – Investing in an altcoin that significantly grows in value over time can lead to explosive returns.

Cons of Investing in Altcoins

• Less Support – Unlike Bitcoin, altcoins still need to work their way up to garner support from traders and investors.
• Oversupply – The market is overly saturated with altcoins, so it is difficult to determine the legitimate coins from those that are not.
• Frauds and Scams – Many altcoins are fronts for fraudulent schemes or scams, so it is essential to research extensively before investing in them.

What Are Stablecoins?

As mentioned earlier, stablecoins fall under the umbrella of altcoins. However, they have one important feature that sets them apart from the rest. In an industry marked by volatility, stablecoins stand out by aiming to keep their coin values consistent. They accomplish this by pegging their values to external assets, such as fiat currencies and precious minerals. For example, cryptocurrencies Tether and USDC peg their values to the US dollar with a 1:1 exchange ratio.

Stablecoins attract a lot of investors because it promises security and less volatility. It is common for crypto traders to exchange their money with stablecoins first before trading with other cryptocurrencies and vice-versa.

Pros of Investing in Stablecoins

• Stability – By design, stablecoin values stay the same, which is a standout in crypto’s highly volatile landscape.
• Security – Investors have a higher level of assurance that their investments will not plummet in value because stablecoin values are connected to fiat currencies or other more tangible commodities.

Cons of Investing in Stablecoins

• No Guaranteed Backing – There is no assurance that stablecoins have the financial assets needed to peg the value they are promising, leading a lot of traders and institutions to scrutinize them.
• Still Irregulated – Like many coins in the crypto market, stablecoins are still highly irregulated, which can put investments at risk because of the lack of regulatory safeguards in place.

Which Coin Should You Invest In?

When it comes to investing in crypto, it is important to not put all your eggs in one basket. The best course of action is to spread your capital into a select group of digital coins that serve your financial goals. After all, people have varying levels of risk tolerance and objectives when it comes to investing. As such, you must consider these factors as you formulate your plan when getting into crypto trading.