Engaging with cryptocurrencies is often exciting and exhilarating. At the same time, the industry is known for its noob-traded pitfalls. Below are some best practices everyone should take into account at all times.
Altcoins Don’t Always Rise in BTC Value
There are some very interesting trends regarding cryptocurrencies these days. Whereas alternative assets are priced in both USD and BTC value, that price level may not increase over time. When the value of Bitcoin rises, most altcoins tend to lose value across both segments for no specific reason.
Even if they recover, it is often in USD value only. Very few currencies are capable of noting improvements in their BTC value, unless they are getting pumped and subsequently dumped. Avoiding these situations is always advised. If one firmly believes in an altcoin’s price potential, buy it in USDT or fiat currency, and trade it back as such too. Avoid the BTC aspect, as traders often end up losing money.
Market Slumps can Last for Years
With the exception of Bitcoin, there is no other major crypto asset capable of sustaining bull runs for very long. In fact, when an altcoin goes down in value and enters sideways trading momentum, such a period can last months, if not years. On paper, one is inclined to think that currencies will return to their previous higher values over time. That is not always the case.
In fact, there have been numerous currencies soaring to an all-time high, only to keep hitting new all-time lows in the following month and years. Speculating on a rebound is not an advisable course of action. Trying to catch a falling knife is often a death sentence for one’s portfolio.
Cheap Altcoins Mean Squat
Compared to Bitcoin, nearly any other crypto asset is relatively cheap. This does not mean any of these altcoins will soar in value over time. Ripple’s XRP is a good example. It is currently valued at $0.26, which seems cheap. However, it has a supply of several billion tokens, which is why its market cap is so high.
Looking at merely the price of an altcoin will not do the trick. One needs to explore the circulating supply, the maximum supply, and the core fundamentals of the project. More often than not, at least one of these aspects will be incredibly unappealing. Those investments are best left alone, for obvious reasons.
There is no “Bitcoin Killer”
Contrary to what some people claim, there is no altcoin capable of dethroning Bitcoin. While some currencies may note high values, their total market cap, branding, and overall appeal will never be on the same level of Bitcoin. In fact, any coin claiming to be the next Bitcoin is probably one of the worst performing altcoins of the future.
Altcoins are completely separate creatures for Bitcoin, and for good reason. There is only one “original” in this entire industry, and that is clearly bitcoin. Altcoins can be good for speculative purposes, but most of them serve absolutely no purpose. This is why their individual value and total market cap are often very low in comparison.