Altcoins were created after Bitcoin and often represent an alternative to the leading cryptocurrency. They occupy almost 40% of the entire cryptocurrency market.
However, altcoins are an incredibly risky investment. Cryptocurrencies have a certain attractiveness as an investment. Altcoins offer good opportunities as they have much greater growth potential in terms of percentage gains. On the other hand, they also have a much higher risk.
It is worth taking a look at Dogecoin as an example. The cryptocurrency skyrocketed in value at the end of January 2021, apparently only because people started buying it, causing the altcoin to go viral. It's better to invest in what you believe in in the long run, because you risk losing a lot when a pullback inevitably occurs.
If you are investing in altcoins in the long term, you should sincerely believe in what you choose as a good investment. Otherwise, it will be an empty idea.
So, how do you determine if an altcoin is a good investment?
When you invest in a security offered on a regulated exchange such as the NYSE and Nasdaq, you have dozens of protections behind you that have been created over more than 100 years of trading. While some initial coin offerings are classified as securities under the jurisdiction of the U.S. Securities and Exchange Commission, many are not. Moreover, even those that are subject to Securities and Exchange Commission regulations may still pose a significant risk of fraud.
In many cases, you may not even know exactly where your money goes when you invest in an altcoin or who is on the other side of the exchange.
No investor can afford to ignore these risks. No one can be an expert in investing in altcoins, since the cryptocurrency is too new, and different versions are constantly appearing. Any investor looking to buy altcoins should definitely do their due diligence.