Advice About Altcoins
Tips before you invest in the next "big one"
It doesn’t take long.
About ten seconds after opening an account on Coinbase, Robinhood, or Binance, you see them. Altcoins—the other cryptocurrencies that are not Bitcoin.
These days, there are thousands of them. Many are legitimate. Others are scams. And for the most part, any investment in altcoins needs to be treated with even more care than an investment in Bitcoin.
Especially since they can be so alluring. Who wouldn’t want to 10x or 100x an initial investment? That can happen with altcoins.
But it’s a good idea to be careful.
Here are some tips:
Only invest money you’re willing to lose. That’s true with any cryptocurrency investment, but it is especially true when putting money into coins outside if Bitcoin. If you’re playing with the mortgage money or your student loan payment, then you’re bound to get hurt. Altcoin money should be side money, money you are willing to walk away from forever.
The more “usecases” the stronger the coin. The word “usecase” refers to the application of the cryptocurrency in the real world (or at least outside of the exchange). Have major companies adopted the technology linked to the coin? Are people using it to buy NFTs or real estate with it? Answering questions like these will go a long way in telling you if a particular coin is a decent investment.
Not all altcoins are memecoins, but all memecoins are altcoins. Memecoins tend to be even more speculative than typical altcoins, and that makes an investment in them even more of a gamble. A memecoin typically has no whitepaper or plan for adoption, and is often based on a cultural touchstone or other icon. Memecoins thrive on hype and movements. They can generate a lot of buzz, and bring in many investors, but memecoins are also ripe places for scams and shakedowns. Investing in any memecoins should be done with clear-eyed sobriety.
Not all altcoins will survive the next five years. The history of crypto is littered with stories of altcoins that appeared promising at first, but later faded into the digital abyss. A coin may have popularity right now, but that doesn’t mean it will be around for decades. A particular investment may not have staying power. Accept this before putting down your money.
Have an exit plan. Because investing in altcoins is more speculative than Bitcoin, have a plan to take profits and get out when you need to do so. And that’s okay. Taking profits is part of the gams. Perhaps your exit plan includes price targets for certain coins, a decision to hold an investment for a specific amount of time, or “cashing out” once your initial investment has been made up by profits.
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.