Since Satoshi Nakamoto introduced Bitcoin on the market, it has dominated the sector. When people start a conversation about cryptocurrencies, Bitcoin is always mentioned because it’s the first blockchain-based currency and has generated significant financial returns over the last few years.
However, even if Bitcoin has maintained its status as the largest digital currency by market capitalization, over 21,000 other coins have been launched, and several have more intriguing features than Bitcoin. Despite the number of people researching how to buy Bitcoin p2p being higher than those looking for altcoins, seasoned investors want to know the alternatives to the largest digital currency because portfolio diversification is crucial to limit the risk when trading crypto.
Suppose you want to add other cryptocurrencies to your portfolio but need help deciding which would make a great investment; here are some recommendations.
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Ethereum has been the number one alternative to Bitcoin since it was launched, mostly due to the fact that it was developed to offer solutions to Bitcoin’s shortcomings. Ethereum is different from Bitcoin in several ways. While Bitcoin was created as a blockchain network that should facilitate digital transactions and payments, Ethereum is an ecosystem that enables the creation of decentralized applications and the use of smart contracts. Ethereum works similarly to an operating system that runs apps when certain conditions are met. The app development potential on the Ethereum network is limitless, which adds value to Ether, the blockchain’s native token.
Many traders prefer Ethereum instead of Bitcoin because the transactions are completed faster. However, it’s essential to highlight that Ether is accepted as currency in fewer places than Bitcoin, and transaction fees on the Ethereum blockchain are higher due to the higher demand for block space.
Many investors are captivated by the benefits cryptocurrencies could offer but fear their funds aren’t safe in an unregulated sector. Ripple was created to provide a higher degree of safety because it acts as a currency exchange and money transfer network that can be used worldwide. It’s different from other cryptocurrencies because it doesn’t have to be mined. Additionally, it has lower fees and enables faster financial settlements than Bitcoin.
It has maintained its place among the 10th most traded digital currencies over the years and is present in numerous investment portfolios, where it acts as the blockchain-based alternative to penny stock.
Tether is one of the most well-known stable coins available in the crypto sector. The token is backed by fiat commodities like gold, euro, dollar, Yuan, and other traditional currencies, allowing investors to transfer money privately, safely, and quickly. Investors usually add it to their portfolios because its rate remains more stable than other digital currencies. As a result, numerous retailers accept Tether payments.
Considering its popularity, it has also drawn the attention of financial regulators, which could prove beneficial for its value in the long run.
Solana is another worthy addition to an investment portfolio because it’s a digital currency and flexible platform for decentralized apps. The project aims to make cryptocurrency more scalable and quicker and is one of the most popular altcoins among investors who don’t like Ethereum. Investors usually turn to it because it’s faster than Ethereum (it processes over 60,000 transactions per second) due to its unique consensus, Proof of History, which confirms when a certain event occurred on the blockchain.
Solana’s popularity is also due to its low gas fees. It has become the network of choice for developers who want to create consumer-facing apps because it’s more affordable. The drawback with Solana is that investors take a risk when adding it to their portfolios because only a few hundred nodes validate the blockchain, which makes it more centralized than the other networks. It’s still in the Mainnet beta, so it’s far from its final form.
Avalanche has drawn attention since the first moment it was introduced, as it was launched in the full 2021 bull market. Its White Paper promises to offer blockchain users straightforward, efficient, scalable, and fast transactions through the three different chains that work on the network to boost transaction speed. Additionally, the project promises not to compromise security, even if it’s focused on transaction speed.
Similarly, to Ethereum, Avalanche uses the Proof of Stake consensus, and it’s more eco-friendly than Bitcoin. It requires blockchain users to pledge their tokens instead of using computing power to validate new blocks.
It’s unique in the blockchain sector because it allows developers to customize the network as they find it suitable to create purpose-suited blockchains. The downturn of AVAX is that it’s costly to become a validator, and therefore it has a low number of nodes which has a negative impact on its decentralization. Besides, its biggest competitors are Ethereum and Solana, which are well-beloved in the crypto community. Therefore, its value rise is slightly limited until it reaches the same status as the other altcoins.
Cardano is a layer-1 smart contract platform with features similar to Solana and Ethereum. However, it differs from them because it has a scientific and rigorous academic review of its algorithm, which makes the network quite secure and highly technological. It’s also an eco-friendly platform because it uses the Proof of Stake consensus mechanism, which allows it to limit the amount of energy it uses for validating new blocks.
While it’s not as large as Bitcoin and Ethereum by market cap, it’s a robust ecosystem because it’s one of the most decentralized blockchains available. Unfortunately, Cardano lacks the level of support Ethereum offers for smart contracts. Therefore, not all investors will find it a suitable addition to an investment portfolio. Considering Ada’s low price, this might be the ideal moment to purchase tokens because its value might boost once the blockchain creators upgrade its programming language. Hence, it’s accessible to more developers.
Altcoins are great additions to a crypto portfolio that contains Bitcoin
Altcoins have always been defined as alternatives to Bitcoin, so they should offer extra benefits. It’s smart to add as diverse assets as possible to your investment portfolio to limit the risk associated with this volatile category of assets.