How to tell if an altcoin has the potential to grow?

by Andy Mora

Introduction to altcoins

The word “Altcoin” is used as a name for every cryptocurrency which came after Bitcoin. So altcoins are both industry-leading coins like Ethereum, Litecoin or EOS, as well as newer, smaller cryptocurrencies.

As we all know Bitcoin is still the king of cryptocurrency, but at the same time, we already have thousands of other cryptocurrencies and blockchain-based services out there. We have coins based on different consensus mechanisms: Proof of Work and Proof od Stake - and many variatios of them too.

After Bitcoin has been created people tried to create altcoins to compete with BTC directly, make exactly what Bitcoin does – but faster and better. Or create totally different mechanisms (masternodes) and introduce services where other applications could be built within altcoin’s blockchain.

Last decade was an amazing ride for cryptocurrency and now we have almost 5,000 altcoins listed on coinmarketcap.com and this number is growing. Despite that cryptocurrency as a whole market is still in its infancy, we are still early adopters here. This means that the current moment might be the most rewarding time to be investigating new and innovative altcoins, but at the same time we might suffer loses if we bet on the wrong horse.

With promising and good altcoin it’s possible to achieve great Return of Investment (ROI) if you enter the scene at the right time. However, it’s also easy to lose your money, as no one can predict how a certain altcoin will perform in the future. We have no idea how the future will shape and if best altcoins could eventually outcompete Bitcoin. One is certain, many altcoin will fail along the way.

We must also bear in mind that altcoins might be extremely volatile and even old, widely recognized altcoins could easily crash from $50 to $5 in a day or gain +400% of its value over night because of some news.

The bottom line is: certain dose of research is necessary before you will be investing in any altcoin. Also, as always you should never invest money in anything, altcoins included, that you can’t afford to risk or potentially lose.

Best way to find out the potential of any altcoin

To find out if the altcoin of our choice has the potential to go higher, grow in value and be a successful asset over time, it’s good to take a look at the following attributes of the coin:

  1. Core functionality
    What are the basic principles of altcoin. What does it do? Does it bring anything new to the table? Does it try to solve some real issues or enter a valid niche market? Will this altcoin be usable over a long period of time and in the future?

  2. Accessibility
    How easy is it to buy this altcoin? Is it listed on reputable and well-known exchanges? Can you buy it directly with USD, or it only can be traded in cryptocurrency-closed environment.

  3. Developers
    Is this altcoin backed by reputable developers? Do we know real names of the dev team? Did they work on some other project in the past? What is on the roadmap for this project? Is the development planned for many years ahead? Will original creators actively support the coin and put effort into communicating with investors and the community?

  4. Stability of the project
    Is this coin considered safe? Have any security breaches been exposed? How long has the coin been on the market? Have there been any scandals in the coin’s history? Has this coin been rebranded or have restarted at some point? How much has coin value increased since the start?

  5. Community and usage
    How many people are currently using this altcoin? Do we have any real life use cases, both already live, or planned in the foreseeable future? How big community support is? How the coin is viewed on social media and among veteran cryptocurrency users?

Closing words

Please note that altcoin investment is not a sure-win as there will be winners and losers in every game. Throughout history we have examples of altcoins that increased by several hundred percents or even more. So it is definitely possible that in 2019 and 2020 onward, we’ll see a similar level of returns for early adopters of the most successful altcoins.

Altcoins are interesting because represent the most innovative technology we have today. It’s important because innovation will be the main motor for FinTech progress. Altcoins bring us exciting possibilities and innovation, and at the same time we can see with our own eyes how new and potentially extremely disruptive technology.

Happy staking!

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