#ALT COINS

Altcoin Explained: Pros and Cons, and Future

By The Investopedia Team Updated May 16, 2024

Altcoins come in several types based on what they were designed for. The future of altcoins is impossible to predict, but if the blockchain they were designed for continues to be used and developed, the altcoins will continue to exist.

PROS EXPLAINED

* Altcoins are "improved versions" of the cryptocurrency they derived from because they aim to plug perceived shortcomings.

* Altcoins with more utility have a better chance of surviving because they have uses, such as Ethereum's ether.

* Investors can choose from a wide variety of altcoins that perform different functions in the crypto economy.

CONS EXPLAINED

* Altcoins have a smaller investment market compared to Bitcoin. Bitcoin has generally remained above 40% of the global cryptocurrency market since 2016.

* The altcoin market is characterized by fewer investors and less activity, resulting in thin liquidity.

* It is not always easy to distinguish between different altcoins and their respective use cases, making investment decisions even more complicated and confusing.

* Several "dead" altcoins ended up sinking investor dollars.

FUTURE OF ALTCOINS

The current state of affairs in the altcoin market indicates that it will unlikely consolidate into a single cryptocurrency. However, it is likely that most of the thousands of altcoins listed in crypto markets will not survive. The altcoin market will probably coalesce around a few altcoins those with strong utility, use cases, and a solid blockchain purpose which will dominate the markets.

If you're looking to diversify within the cryptocurrency market, altcoins can be less expensive than Bitcoin. However, the cryptocurrency market, regardless of the type of coin, is young and volatile. Cryptocurrency is still finding its role in the global economy, so it's best to approach all cryptocurrencies cautiously.