How to Invest in Altcoins? Three Most Profitable Strategies

The modern e-market has a large number of altcoins. Only in six months there was created 500 cryptocurrencies. But in the conditions of severe competition, only a few types of digital money will survive.

Arguments in favor of altcoins

The experts believe that altcoins are an integral part of the cryptocurrency market. Alternative currencies contribute to the decentralization process.

Altcoins can become a good base for conducting various kinds of experiments: programmers can choose the characteristics, test their compatibility, etc. Through such surveys, the Internet community can gain digital money with unique properties.

Alternative coins create competition in the electronic market. If Bitcoin were the only cryptocurrency on the Internet, there would be no incentive for development. In a competitive environment, Bitcoin developers have to mobilize all their forces and offer users an updated cryptographic system.

Some of the famous altcoins

Namecoin is the first altcoin, which was taken as a basis for creating a DNS – domain name system. The DNS main feature is that it cannot be controlled by government. Users mine NMC along with BTC. In a competitive environment, Bitcoin developers have to mobilize all their forces and offer users an updated cryptographic system.

Litecoin belongs to the category of the most successful altcoins. Money functions in Scrypt (modified hashing algorithm).

Litecoin has such characteristics as:

  • high transaction speed;
  • a few database blocks;
  • the limited number of units produced - system cannot produce more than 84 million units.

Litecoin has an insufficiently developed infrastructure: a limited number of stores accepts LTC; the system does not have ATM or POS terminal network, and it doesn’t open gateways to the banking network.

DOGE (Dogecoin) also uses the Scrypt algorithm. The cryptocurrency creation began with a joke. Coins attracted the users' attention and quickly spread across the Network. Some people believe that the reason for the popularity is brand logo: it depicts a cute dog of Shiba-Inu breed. The system produced over 100 billion currency units. The coins issue continues.

"Doge" has such advantages as:

  • low transaction cost;
  • instant confirmation of financial transactions;
  • the opportunity to receive LTC during DOGE mining.

Ripple. The currency of the system (XRP) has an original code that creators wrote from scratch.

The system has the following features:

  • it is open source;
  • there is a high speed of transactions;
  • it requires the minimum fees for carrying out financial transactions.

Nextcoin (NXT). The currency uses storage confirming method of Proof-Of-Stake. Users do not need to carry out mining to earn coins. The cryptocurrency developers wrote code independently (by using Java). The system operates in a decentralized scheme. Nextcoin participants don’t need to install software for e-purse on the computer.

The Proof-Of-Work and Proof-Of-Stake technologies

Many cryptocurrencies practice simultaneous use of a Proof-Of-Stake and Proof-Of-Work technologies. It means that the transaction confirmation involves only funds which are held in accounts. Mining requires a lot of energy. But this method of operating a payment service allows you to reduce power consumption.

How to choose liquid altcoin?

After deciding to invest money in altcoins, the user should study the market, see the peculiarities of one or another cryptocurrency. Before investing you should choose the cryptocurrency with high liquidity. Invest only in projects that you have personally researched and tested.

How to invest in altcoins?

1. Buy altcoins in ICO stage

You can invest in altcoins during initial placement. It ensures the lowest price. If you want to make use of altcoins, it is better to start with the ICO. The coins can significantly raise or collapse to zero. Coins’ value can jump to 100-300% immediately after the ICO completion and the start of trading. It is the right time to sell them. If there is no surge in prices shortly after the ICO, you should focus on the growth of 50-100% and sell them. This strategy works well if you consider the risks and invest the money in a few ICO.

2. Wait for the temporary price drop

It is possible to wait until the token is released to the market, and avoid the mania of ICO. Buy cryptocurrency when the first drawdown happens. In some cases, this strategy allows you to buy altcoins cheaper than during the initial placement. The reason for the price decline is that after the release of the coins investors and people who received the tokens as payment for the ICO preparation and promotion begin to sell it. Keep in mind that this practice may distort the market capitalization of the company.

3. Use technical analysis

Investing money for a more extended period can also be profitable. In this case, you see the first ups and downs and analyze charts. It is more complicated but less risky strategy. Follow the technical analysis patterns volume and compare the market coins capitalization with similar altcoins to understand if it is overvalued or undervalued. This strategy looks more serious, as you appreciate the conditions and factors that affect the cost of cryptocurrency and determine its direction.