The Case for Altcoins

Authored by Makara
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Makara

Published September 16, 20216 min
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We get the Bitcoin love, we really do. It’s the biggest name in crypto, with the highest price, and the greatest market cap. We support investing in it, of course, and see it as an excellent store of value. That’s why it’s included in so many of our investment baskets. There’s also its appeal as an alternative to gold. But to focus solely on Bitcoin is to miss out on much of what crypto has to offer. Here are a few reasons you should consider investing in other tokens.

1. It’s smart to diversify.

If you’ve ever watched Jim Cramer’s face discover new shades of red, you are familiar with diversification. If you’ve read anything on Makara, you’ve certainly heard us talk about it, too. (We dedicated a blog post to explaining its importance and how diversification works in crypto, which you can check out here.) It’s a classic strategy for a reason: it works. By spreading your investments across different types of assets, you reduce risk. And in a market as volatile as crypto, that is a good thing.

2. Stablecoins offer…stability. 

Because they’re pegged to things like fiat currencies or traditional commodities, stablecoins don’t have the same volatility of the rest of crypto. They can be investments, like PaxGold, which mirrors the price of gold, but, more often, they’re transactional currencies that have consistency in a way that Bitcoin never could. For example, if you paid for a car in Bitcoin, between the time the dealer accepted your offer and you drove off the lot, there could easily be a 20% shift in BTC’s value—and either you or the dealer would feel pretty ripped off. Similarly, stablecoins are also useful for active trading, allowing you to move capital without wondering what it would be worth when it got to its destination. And for those who live in nations with less-than-stable fiat currencies: If you translate your income into stablecoins, you can effectively put your savings into U.S. dollars without facing the greater volatility of your nation’s currency and of the greater crypto world.

3. Altcoins offer the potential for big gains.

Bitcoin’s price has been in the $45,000–$50,000 range for the last couple of weeks. It has the potential to go much higher (some say ten times as high in as little as five years), but with many altcoins priced at fractions of a dollar (or even a fraction of a cent), that exponential early growth potential often has not been reached. Just look at Solana, a decentralized platform that has jumped more than 5,000% in the past year. Altcoins tend to boom and bust far faster than big-name crypto like Bitcoin. You can, of course, try to predict how a particular coin’s price will rise and fall from day to day. But this can be particularly time-consuming—which is why Makara tries to identify coins with potential for you and include them in our investment baskets. 

4. Altcoins support applications that Bitcoin doesn’t.

With so many altcoins in existence, there is undoubtedly at least one that allows you to invest in a sector that interests you. Say you’re interested in decentralized finance—peer-to-peer systems that offer financial services like holding assets and providing loans, but without middlemen charging a bunch of extra fees. You could invest in them through different altcoins. (Makara has a whole basket specifically devoted to DeFi that you can check out.) But there are plenty of other possibilities. If you’re a gamer, you can look into blockchain-based multiplayer gaming platforms like The Sandbox or related platforms like Enjin, which lets game designers create unique assets (like virtual swords) for players to purchase and use in games. Or there are niches like shared computing (Livepeer lets you help distribute computing power across the globe) or cloud storage (Storj).

All of this may make altcoins sound like a wonderful investment, and, of course, they can be. But they’re also not perfect. They don’t have the history or, in many cases, the widespread adoption potential of Bitcoin. That’s why we continue to hold BTC in high regard. Keep your eyes on it, but make sure it’s not the only asset you’re looking at.