Investing in cryptocurrency UK, can be done using several different strategies. One of them is Altcoin investing, which is perhaps the most well-known in the market right now. Why? Because cryptocurrencies like Solana and Dogecoin have made headline news with the huge returns they have provided investors.
Investing in Altcoins increases your risk but can offer much higher returns. There are many different cryptocurrencies to choose from so doing solid research is important.
If you choose an Altcoin investing strategy, you must firstly know what the top Altcoins are and how to invest. Adding Altcoins to your portfolio is one of the best cryptocurrency investing strategies you can use.
Being able to read the market to understand when the market sentiment is bullish is a great tool to have within your Altcoin investing strategy. Reading the crypto money fear and greed index will give you an idea of how other investors are feeling.
Understanding whether the market is bullish or bearish will have an impact on your investing methods. In-depth cryptocurrency market cycles explained will help you learn how and when to invest in altcoins.
What Is An Altcoin
An Altcoin is a cryptocurrency that is not Bitcoin. There are over 2000 different Altcoins each with their own underlying features. For example, Ethereum and Polkadot are Altcoins.
The market is determined by Bitcoin’s price action. Cycles suggest that Altcoins follow Bitcoin’s price just in a slight lag. When Bitcoin dominance increases Altcoin prices fall and when Bitcoin dominance decreases Altcoin dominance increases and so does the price.
How To Invest In Altcoins
An Altcoin investment strategy first begins with market knowledge and research. Understanding how to invest in cryptocurrency is also a good starting point.
As mentioned, an Altcoin is anything that is not Bitcoin, which leaves you with thousands of cryptocurrencies to invest in.
When you are researching you must first decide on a topic, category or ecosystem you are interested in. This could be any number of things: play to earn games, layers 1s, oracles and so on. To do this go on Coingeko or Coinmarketcap and search through the tags and categories.
Search the news to see what the current narrative is, follow trusted twitter accounts and mine information about what the next big crypto category could be.
You are able to find these opportunities on your exchange of choice, whether you’re using Coinbase, Swissborg, Revolut, Binance and so on. The idea is to scroll down and take a look at the cryptocurrencies you wish to browse.
One of the pros of Coinbase is the blurb on each cryptocurrencies page, which explains what the token is and what it’s used for.
When To Invest In Altcoins
The best Altcoin investments come with the right timing. It’s very hard to time the market but understanding the flow of money into Altcoins can give you a better idea of when to make an investment.
The holy grail of cryptocurrency investing is to hold the right Altcoins during an Altseason. An Altseason is is when money flows out of Bitcoin and into Altcoins, which is a major positive impact on the price of Altcoins. This is when Altcoin investors make life changing returns.
Let’s take a look at the money flow cycle:
As we can see from this simple chart, money cascades down from Bitcoin through the market making its way to the small and microcap Altcoins. At each stage the price increases rapidly to that specific set of cryptocurrencies.
Learn the money flow chart and when to spot this happening. Identifying where we are in the money flow cycle will allow you to increase or decrease your risk and adjust your investments accordingly.
How to Buy Altcoins
Buying Altcoins requires just a couple of steps, similar to learning how to invest in Bitcoin. You can either buy Bitcoin to exchange for Altcoins or you can buy Altcoins directly. It all depends on what investing platform you’re going to use to invest in Altcoins.
In this article, we recommend buying Altcoins with cash directly from Coinbase, Swissborg or Revolut.
However, on cryptocurrency exchanges most Altcoins are paired with Bitcoin, so in a later article in this series we will explain how to buy Altcoins with BTC.
Step 1: What percentage of your crypto portfolio will be dedicated to Altcoin investing
Decide what type of crypt investor you are and how much risk you’re willing to take. High risk usually means high reward in crypto. However, a lot of Altcoins fail to make it so invest wisely.
Download a portfolio tracker or create a spreadsheet. Layer your chosen portfolio tracker into risk layers.
If you are at the start of your investing journey, stay within the top 100 cryptocurrencies by market cap.
Step 2: Do you own Altcoin crypto research
There are many ways to research Altcoins. Coingeko, Coinmarketcap and Coinbase all have blurbs describing each Altcoin.
But you must dig a little deeper to make sure it’s the right investment for you. Here’s a checklist to use before buying an Altcoin:
- Visit the website
- Read the whitepaper
- Look at the team and their Linkedin
- Research the big investors
- Browse the roadmap to see what they are releasing
- Visit the twitter page to see the size of their community and are they active
Step 3: Choose an investing platform
Decide which Altcoin you want to invest in and then make sure your chosen investing platform or exchange supports it.
However, if you feel confident with Coinbase, Swissborg or Revolut then just research each Altcoin they support and decide from there. Doing this limits your choice a little but if you’re just starting to invest in Altcoins it’s recommended to stay within the top 100 until you gain more experience.
Step 4: Buy your Altcoins
Sign in to your chosen investing platform or exchange and buy your chosen Altcoin with a debit or credit card.
Alternatively, you can buy Ethereum and send it to your wallet. From here you can use Uniswap and exchange your Ethereum an Altcoin. Uniswap is a decentralized exchange, which supports the majority of Altcoins in the cryptocurrency space.
Step 5: Move the Altcoins to your wallet
When you have purchased your Altcoins send them to one of the best hardware or software crypto wallets to keep them safe.
However, once you have invested in your chosen altcoins you can then decide your altcoin investing strategy. For example, you can opt for a long term crypto investment strategy and dollar cost average in your crypto or you can simply buy and hold or leave it and learn how to earn passive income in crypto as another revenue stream.
Although these are crypto investing strategies for beginners, when you feel more advanced you could even begin to trade and be a little more active.
What Are The Best Altcoins To Invest In?
There are so many different types of Altcoins available we recommend picking some categories you are interested in. Some popular categories are:
Play to Earn Gaming
Play-to-earn gaming is an exciting concept that allows players to earn the native cryptocurrency just for playing. The cryptocurrency can then be exchanged for cash or other cryptocurrencies like Bitcoin.
Oracles help cryptocurrency projects connect with technology outside of crypto and outside of blockchain. For example, blockchain technology may share their features or data with Google. It’s the Oracle that provides the bridge to do this.
DeFi (Decentralized Finance)
This is an emerging financial technology which operates using smart contracts. Which means the system removes the control of banks, institutions, financial products and services. DeFi has been one of the most profitable investments in recent years and is being touted as the next financial system to take over traditional banking.
NFT (Non-Fungible Tokens)
NFTs are digital collectables. NFTs store unique information on the blockchain, essentially no NFT is the same, only one ever exists. NFTs are encrypted with rich metadata to make them unique. NFTs have become mainstream and look like they could be a major part of the future.
The Metaverse has surged in popularity thanks to Facebook rebranding to ‘Meta’ and pledging their future on creating a metaverse. The Metaverse is a pocket of the internet where there’s a shared virtual reality. Participants can interact with each other in a separate world.
Smart Contracts Platform
Smart contracts platforms are blockchains that host smart contracts technology for decentralised applications (DAPPS). Users can use smart contracts to exchange tokens, stake tokens, mine NFTs and so on. Smart contracts are the underlying technology that cryptocurrency is built on.
Dogecoin is perhaps the most famous Meme Token, which has provided significant returns. Shiba Inu has also risen in popularity. Investing in Meme Tokens can provide huge returns but they are some of the more risky Altcoin investments in the space.
One of the best ways to find undervalued Altcoins is to research the ecosystems of some of the most innovative high market cap coins. The smaller undervalued cryptocurrencies within the bigger ecosystems are the picks and shovels investments in cryptocurrency. Here are some of the top crypto ecosystems to find Altcoins:
Solana is a general blockchain similar to Ethereum, however the underlying technology is a little different. One of it’s biggest features is its scalability. The team maintains it’s the fastest blockchain in the world.
The Solana price action has surged over the last 12 months and so has its underlying projects. Solana is still a young blockchain and there will be plenty more projects launching on it.
Polkadot is a multi-purpose blockchain that supports interoperability. Projects can rent a ‘parachain’ on Polkadot for short or long timeframes.
Building on polkadot means the underlying projects within the ecosystem can bridge to other blockchains like Ethereum and Bitcoin and engage with them.
The Polkadot ecosystem is yet to have its day in the sun, so there could be some hidden gems within.
Cardano’s ecosystem is still emerging, which means it’s one to keep an eye on over the next 12 months. Cardana is a smart contracts platform with a solid community and heavy investment. After Chainlink, the next project in the ecosystem by market cap is Coti which sits at 234th by market cap. This clearly shows the potential of this emerging technology.
Cosmos is built with several sole blackchains. The main aim of Cosmos is to create an internet or network of blockchains that all work together. Essentially, you can plug the Cosmos network into any blockchain and pass tokens in and out.
The interoperability narrative could be big over time, so the projects within Cosmos could be a solid investment as the native token of Cosmos called Atom, has room to grow to catch up with the likes of Polkadot.