How to Choose Which Altcoin to Invest In?

Jun 30, 2016 at 12:58 // Price

The emergence and growth of the popularity of the alternative currency Bitcoin has led to the creation of many other cryptocurrencies based on Bitcoin Blockchain code. All these cryptocurrency have the generic name - Altcoins.

More new coins appear on the financial market often and immediately become the object of investment. To increase the investment attractiveness of altcoins in the network we receive information about the specifics of digital currencies which have more advantages than Bitcoin. For example, the possibility of producing more coins, the speed of transaction verification, and so forth. For Bitcoin developers, the development of their own innovations is more important, while other altcoins can be hardly regarded as competitive.

But investors are looking for any other possibilities to save and increase their wealth, as for them, the most important thing is the investment attractiveness of one or the other cryptocurrency. And if tomorrow the price, for example, of Litecoin will grow much faster than Bitcoin, investors will have a desire to sell Bitcoin and buy Litecoin.

In this article, we will try to uncover what criteria investors use to evaluate the investment attractiveness of  altcoins. The main rule of the trader in the market is to follow the trend. If the trend is up, you need to buy, if trend is downward - you  should sell. To start, we will take a look at the most popular altcoins, which are offshoot projects of Bitcoin.

Litecoin (LTC)

This cryptocurrency was launched in 2011. Unlike Bitcoin, which has a limited number of 21 million coins, the number of Litecoins is four times higher - 84 million. Moreover, Litecoin transactions are also four times faster than Bitcoin - 2.5 minutes for Litecoin vs. 10 minutes for Bitcoin. Litecoin is characterized by high volatility and high volume on the trading market.

Ether (ETH)

A relatively new exchange unit, which unlike other cryptocurrencies, can serve as a means for sharing resources using smart contracts. ETH is often called as cryptographic fuel, which is necessary for the Ethereum platform to work. Therefore, ETH generally has an interest for specialists who develop and disseminate decentralized applications.

Since the issue of ETH is limited,  its price is expected to increase over time.

Peercoin (PPC)

Peercoin is considered to be a self-cryptocurrency, which has an improved security system and a special algorithm. Payments in this cryptocurrency can be sent around the world. The mining has low expenses, as there is no need for enhanced maintenance of equipment to achieve the minimum commission for transfer payments.

Dogecoin (DOGE)

The basis of this cryptocurrency algorithm was adopted from Litecoin. The number of coins in circulation can be unlimited. The DOGE price is first calculated against Bitcoin and then multiplied by the ratio of Bitcoin exchange rate against the US Dollar.

Neucoin (Neu)

Neu is a relatively young cryptocurrency. Its launch was initiated in early 2015. Initially Neucoin was developed for the micropayment market below $1. However, in September 2015 Neucoin’s value reached 14 USD per 1000 Neu, which forced investors to pay attention to this altcoin. A characteristic feature of this altcoin is high volatility in the market.

How to choose your altcoin

To make it clear how altcoin prices change on the market, let’s take a look at one of the examples. This is a graphical analysis of the Litecoin price over the past 2.5 years:

Dynamics of LTC/BTC exchange rates in June 2016

LTC/BTC exchange rates in June 2016

The dynamics of the price of LTC/BTC from 2014 to 1st half of 2016

The dynamics of the price of LTC/BTC from 2014 to 1st half of 2016

The dynamics of the price of LTC and the BTC against the US Dollar from 2014 to 1st half of 2016

The dynamics of the price of LTC and the BTC against the US Dollar from 2014 to 1st half of 2016
The dynamics of the price of BTC against the US Dollar from 2014 to 1st half of 2016

As you can see in the charts, the Litecoin price against the US Dollar and Bitcoin has been steadily declining. Thus, advantages of Litecoin over Bitcoin had no effect on the price increase of Litecoin. However, considering these charts it is difficult to assume a rising trend for Litecoin.

Similarly, we can try to analyze the direction of the trend of any other altcoin.

Using the review of the major altcoins we will try to identify the top-5 most important criteria when buying cryptocurrency.

1. Investment attractiveness. The rising cost of a cryptocurrency over a time interval is an important criterion when selecting an object of investment. Stable growth for 2-3 years speaks to the confidence of players in the cryptocurrency. Moreover, using collected information, the investor should be aware of the direction of the trend.

2. The cost of production of coins - a factor that consistently affects the market value of the coin.

3. The number of coins that can be mined. An unlimited number of coins in circulation have a negative impact on the growth of altcoin price. Too limited a number of coins can also scare away investors.

4. The volume of sales and the number of participants. The more activity around a certain cryptocurrency, the greater the likelihood of its price growing.

5. Appearance on the cryptocurrency exchanges and partnerships with other existing payment systems. It is important to select the exchange with higher prices, and for depositing or withdrawing funds when buying or selling cryptocurrency.

Each investor must independently determine the feasibility of buying a particular investment instrument. 

This analysis and forecast are the personal opinions of the author and are not a recommendation to buy or sell cryptocurrency.


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