Piggy banks in different directions (Getty) If you’re new to cryptocurrency investing, it’s easy to fall into the trap of thinking bitcoin and ether – the native cryptocurrency of Ethereum – are the only solid, safe investment options in the market. And while many maximalists might agree with you, alternative cryptocurrencies (known as altcoins) are clearly on the rise.
According to the latest figures , bitcoin dominance as measured by market capitalization has fallen from 69% to 42% of the value of the total crypto market over the last year, while altcoins have risen from 11% to 21%. Non-fungible tokens ( NFTs ) and DeFi -related protocols are two likely catalysts for this change, as an increasing number of holders diversify into tokens tied to the rapidly growing ecosystems.
Diversification is important for managing and growing a portfolio, particularly if you’re new to investing. U.S billionaire Warren Buffett once said, “Diversification is protection against ignorance.” Isolating your investment to two coins out of the over 17,000+ possible options can not only amplify your risk but can also minimize your potential profits.
As such, it is advisable to look beyond the appeal of bitcoin and ether and consider allocating part of your portfolio to other promising crypto assets.
When searching for alternative investment options in the crypto market, it’s important to evaluate the options you are considering to determine the ones that best fit your investment strategy. Factors to evaluate include; Availability: This means how many exchanges or platforms list the particular crypto asset. Is it easy to buy and sell large volumes at any given time? Is the token supported across multiple blockchains?
Roadmap developments: When investing for the long-term, you’ll want to make sure the underlying cryptocurrency project has a strong future development plan, including the addition of new features, partnerships and updates. These should help support the corresponding token’s price over time and attract new investors to the project.
Investment viability: It is critical to analyze the viability of the digital assets you are considering investing in. You do not want to invest in a cryptocurrency whose value could potentially fall before your investment time horizon elapses. As such, you must identify the utilities of the token, how it stacks up against other competing projects and the strength of the community backing it.
Crypto sector: When choosing a coin to add to your portfolio, it is crucial to avoid investing in a cluster of coins that tend to all move in tandem. In the crypto market, the prices of digital assets tackling similar industries or crypto sectors often rise and fall at the same time. For example, having too many DeFi tokens would likely expose you to unnecessary risks, especially during times when the DeFi market experiences a slump. To prevent this, you should spread your portfolio across various crypto sectors, including NFTs, DeFi, layer 2, crypto exchanges and the metaverse .
Solana is another fast-emerging blockchain ecosystem looking to displace Ethereum as the largest hub for decentralized applications (dapps). Like Binance Smart Chain, Solana’s goal is to create a more affordable and faster means of accessing and transacting on the blockchain apps.
In particular, it focuses on optimizing decentralized finance (DeFi) such that DeFi apps can become accessible on a larger scale. Moreover, it has begun to make moves in the NFT space, thereby creating more reasons for users to engage with its network. As such, SOL, which is Solana’s native digital asset, has increasingly appealed to investors and dapp users alike such that its price grew by over 10,000% in 2021.
Also, the network hosts a vibrant staking economy with over 74% of the total supply of SOL currently being staked. For those unfamiliar with the term staking, it is the process of depositing or locking away an amount of tokens on a blockchain to become eligible to take up the role of a validator, or an active participant of the network, and, in turn, earn rewards.
Similar to how Solana and Binance Smart Chain are trying to dethrone Ethereum, Cardano has created a highly sophisticated infrastructure designed to eliminate some of the flaws of established crypto networks.
While the development of Cardano kicked off in 2017, it was not until 2021 that the team launched an upgrade that allowed the blockchain to provide smart contract functionality. This made it possible for Cardano to host and facilitate the creation of native decentralized applications that use smart contracts for their operations. Due to this infrastructural advancement and other factors, ADA, the native token of […]
source Investing in Crypto: Alternatives to Bitcoin and Ether
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