Trading altcoins? Read this guide first!

  • Trading altcoins can be risky because they are highly speculative and have a higher potential for volatility than more established cryptocurrencies like Bitcoin
  • In general, they tend to have a higher correlation with Bitcoin than with other traditional assets such as stocks or commodities
  • Large cap altcoins are generally considered to be more established and stable than small caps
altcoins

An altcoin, or alternative coin, is any digital currency other than Bitcoin. Many altcoins were created as alternatives to Bitcoin in order to improve upon various aspects of the original cryptocurrency, such as transaction speed, security, or privacy. Some of the most well-known altcoins include Ethereum, Litecoin, Ripple, and Monero. However, there are thousands of altcoins currently in existence, each with their own unique features and use cases.  

High volatility 

Trading an altcoin can be risky because they are highly speculative and have a higher potential for volatility than more established cryptocurrencies like Bitcoin. This is because Bitcoin has a larger market capitalization and a more established user base, which makes it less susceptible to price fluctuations caused by small trades or market manipulation. However, the volatility of altcoins can vary depending on the specific coin and its market capitalsation. Some may be less volatile than Bitcoin, while others may be much more volatile.  

Correlation to other assets 

The relationship between altcoins and Bitcoin can vary. In general, altcoins tend to have a higher correlation with Bitcoin than with other traditional assets such as stocks or commodities. This is because they are often seen as alternative investments to Bitcoin, and their prices can be influenced by similar factors such as market sentiment and overall cryptocurrency market conditions. However, it is important to note that the correlation between Bitcoin and an specific altcoin can change over time and may not always be strong. Additionally, some altcoins may have different use cases or underlying technologies that can affect their price movements independently of Bitcoin. 

How to choose an altcoin to trade? 

Large cap altcoins are generally considered to be more established and stable than small caps. They have a higher market capitalization and are often more widely known and accepted in the market. Because of this, they may be less volatile. However, this also means that they may have less room for growth than small cap altcoins. 

The best altcoin to trade will depend on your individual investment goals, risk tolerance, and research. It is important to conduct thorough research and due diligence on any altcoin before making a decision to trade it. This includes analyzing the coin’s technology, team, partnerships, and overall market conditions. 

Final thought 

In any case, it’s important to conduct thorough research and due diligence before trading any cryptocurrency. Additionally, the volatility of altcoins can change over time and may not always be consistent. It’s also important to keep in mind that volatility in crypto markets is normal, and it’s considered a high-risk type of investment 

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