Altcoin, an Alternative Crypto Investment Besides Bitcoin

What is Altcoin?

The term “altcoin” stands for “alternative” and “coin”. As the name implies, it is refers to any cryptocurrency other than Bitcoin. The emergence of altcoin is based on overcoming the problems possessed by Bitcoin, the world’s first crypto asset pioneer.

As digital assets, altcoin operate on similar principles to Bitcoin. The difference lies in the specific blockchain technology utilized as their underlying network. Furthermore, each altcoin is designed with unique functions, roles, and value propositions.

The first altcoin to be created was Namecoin (NMC) in 2011. Since then, the altcoin landscape has expanded dramatically, with tens of thousands of altcoin now in existence. According to data from TradingView, the total market capitalization of altcoin stood at $1.21 trillion as of May 16, 2025, representing 37% of the overall crypto asset market capitalization, which reached $3.27 trillion.

Differences between Altcoin and Bitcoin

Although both altcoin and Bitcoin are built using blockchain technology, they have differences. One significant distinction lies in their function and role. As altcoin are often developed with more advanced technologies, many offer superior characteristics compared to Bitcoin in aspects such as transaction speed and lower fees.

Bitcoin was initially conceived as a decentralized alternative currency and a store of value. In contrast, altcoin serve a diverse range of purposes and functions. From supporting smart contracts, facilitating transaction fees within specific networks, powering decentralized finance (DeFi) applications, to maintaining the value of other assets, as seen with stablecoins.

Another difference is the potential risks and returns as investment assets. altcoin, excluding stablecoins, generally exhibit higher price volatility than Bitcoin, presenting the potential for greater returns alongside higher risks.

Types of Altcoin

Given the diverse functionalities and underlying technologies of altcoin, they can be broadly categorized as follows:

1. Stablecoins
   Stablecoins are altcoin designed to maintain a stable value by pegging their price to a fiat currency or a commodity at a 1:1 ratio. Popular examples are USDT, USDC, and PAXG.
2. Utility Tokens
   Utility tokens are altcoin designed to be used in a specific blockchain ecosystem, often serving as payment for transaction fees or other services offered on the platform. Examples include ETH (used for payments on the Ethereum network) and SOL (used for payments on the Solana network).
3. Governance Tokens
   Governance tokens are altcoin designed to allow their holders the right to participate in voting on decisions related to the development and governance of their respective blockchain projects. UNI, the governance token for the Uniswap decentralized exchange, is a prominent example.
4. Memecoins
   Memecoins are altcoin that typically created for entertainment or based on internet trends and often possess little to no inherent utility. Popular examples are DOGE, SHIB, PEPE, and WIF.

Advantages of Altcoin

If you’re considering altcoin for investment, here are some potential advantages:

1. Profit Potential
   Altcoin have higher price volatility compared to Bitcoin. This allows for the possibility of prices surging by over 100%, outperforming Bitcoin’s returns.
2. Uses Beyond Investment
   Many altcoin offer functionalities beyond just being investment assets. For example, Binance Coin (BNB) provides users with various benefits within their ecosystem.
3. Technological Innovation
   The altcoin market is characterized by constant technological advancements, often presenting improvements over previous generations. These innovations can include lower transaction fees, faster processing speeds, and enhanced features.

Disadvantages of Altcoin

Conversely, if you’re considering altcoin for investment, be aware of these potential disadvantages:

1. Potential Losses 
   Higher volatility translates to higher risk. altcoin prices can experience significant drops, potentially exceeding 90% from their peak values.
2. Too Many Options 
   The cryptocurrency market currently hosts thousands of different altcoin. However, only a small number of projects have solid fundamentals, potential, and active user communities.
3. Sustainability Concerns
   Many altcoin fail to thrive due to being surpassed by newer, more innovative altcoin or even being abandoned by their development teams.

Investing in Altcoin

For investors with a higher risk tolerance, altcoin can be an alternative investment. Here are several factors to consider when evaluating altcoin for investment:

1. Technology
   Each altcoin offers unique technological features and advantages. Prioritize altcoin with groundbreaking and beneficial technologies. Examples include Solana (SOL) for its speed, Ethereum (ETH) for its decentralized smart contract capabilities, and Fantom (S) for its security focus.
2. Use Cases
   Altcoin often serve dual purposes: as an asset and as a functional component within a specific platform. For examples, Solana functions as a blockchain platform, while SOL is used to pay transaction fees within the ecosystem. Choose altcoin with clear and compelling use cases that ensure continued user adoption.
3. User Base and Community 
   The underlying technology and usability are less impactful without a strong and active user base and community. These factors indicate the real-world adoption and utility of the altcoin’s technology and its potential for growth.
4. Tokenomics 
   Tokenomics, or the token economy, encompasses the distribution, circulation, and total supply of a cryptocurrency. Consider altcoin with token distribution models that prioritize users and project development rather than solely benefiting investors. The more tokens that are already circulating in the market can also be an indicator to consider.