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Ways to invest in altcoins
To invest in an altcoin you first need to sign up for a broker or an exchange platform. They allow you to buy, sell, or trade coins, and the best choice depends on which altcoins you want to own and how long you intend to hold them for.
There are a few different ways to invest. You can buy and hold the coins in the hope that they grow in value, trade them quickly to benefit from small changes in price, or put your money in regulated funds that own the cryptocurrencies themselves. You can learn more about how to invest in each different altcoin by reading through the guides below.
What is an altcoin?
It’s a cryptocurrency that isn’t Bitcoin. Generally speaking, they are digital currencies or tokens that share a similar set of features, such as being supported by blockchain technology. Usually a coin is attached to a project, but the scope of these vary wildly, from ones with innovative plans to revamp corporate supply chains to jokes based on internet memes.
Another shared feature across all altcoins is that they are assets that you can speculate on by buying, selling, or trading them. They’re popular because they’re often volatile, and their prices can rise or fall dramatically in the space of a few hours.
The first altcoins began appearing in 2011 and many of them developed out of a desire to improve on or adapt the Bitcoin model. The most well-known altcoin is Ethereum, which has been around since 2015, and thousands more have been released since then.
How do altcoins work?
It depends on what the purpose of the coin or token is. All cryptocurrencies use an online public ledger known as a blockchain to track and store its transactions. Beyond that, they can work in many different ways and each coin is usually released along with a white paper that explains the specifics in detail.
The key point behind the development of all these altcoins is decentralisation. They all offer alternatives to the traditional online framework where a central body, which might be a bank or a tech company like Google, can act as the gatekeeper. The blockchain is not owned by any one entity and it usually isn’t all hosted in one place.
Instead, the power and responsibility is spread out between everyone that uses it. Many coins confer voting rights on their holders, who can help to shape its future. Meanwhile each blockchain is hosted by many different computers in different places around the world, so it’s very difficult to attack or change it.
The different ways to invest in altcoins
Your investing options depend on the coin you want to own. The term ‘altcoin’ covers such a huge range of coins that the options for the leaders of the pack are very different to those at the bottom. Here are all the different ways to invest, but keep in mind that not all are available for every coin.
- Broker platforms. Brokers are the easiest way to get cryptocurrency as they let you buy or sell coins instantly at a set price. The trade-off for convenience is cost: usually that price is the market rate with an extra fee or commission added on. Brokers also usually only offer top of the range coins. So while this is the best option for coins like Litecoin, XRP, and Dogecoin, it isn’t for the vast majority of altcoins.
- Centralised exchanges. Exchanges are places where you can buy and sell coins at the market rate. They act like marketplaces that match orders together and have a constantly updating live price for each coin. There are more options to buy larger amounts and far more ways to pay for each altcoin, either with other cryptocurrencies or a fiat currency (like GBP or USD).
- Decentralised exchanges. These are platforms that are built on the blockchain themselves and where there is no third party running the platform. Like with centralised exchanges, they match your buy or sell order with someone on the opposite side of the trade. You have to have a cryptocurrency wallet in order to use them, and they aren’t as polished and user-friendly as centralised platforms, but let you trade virtually every coin in existence.
- Crypto ETFs. There are a handful of exchange-traded funds which own cryptocurrency. These are passive funds that simply track the performance of an asset and are a way of investing in crypto in a more regulated way. ETFs have to be approved by the financial authorities and trade on the stock market. However, crypto ETFs focus almost exclusively on Bitcoin at the moment. There are one or two that own Ethereum but it might take some time before this option is more widely available.
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Fact-checking & references
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