Investing in cryptocurrency is one of the best decisions in both stable and crisis markets. In the pandemic year of 2020, bitcoin's performance was 300% against 23% for gold, the closest competitor from the world of traditional finance. In the pre-crisis period - from 2013 to 2019 - BTC rose 50 times against gold, from 0.1 ounces of metal for 1 BTC to 5 ounces.
Many investors prefer to hold not only bitcoin but also smaller digital assets - so-called altcoins - in their cryptocurrency portfolios.
Altcoins refer to all cryptocurrencies except for the oldest of them, bitcoin. Another exception is ethereum, which has become the largest decentralised ecosystem and rarely correlates with the notion of "altcoin" today.
Reasons to include altcoins in an investor's portfolio
There are several reasons to include altcoins in an investment portfolio:
- Betting on promising technology. The main goal of any altcoin is to improve the technology originally introduced by the developers of bitcoin. Nowadays, the creators of several projects have made significant progress, launching a full-fledged decentralised financial market, or DeFi;
DeFi refers to all services and applications based on blockchain or other decentralised technologies. These include:
- DApps, or decentralised applications;
- DEX, or decentralised exchanges;
- NFTs, or non-interchangeable tokens.
- A greater return on investment. Altcoins with smaller capitalisation and promising solutions grow faster as a percentage than large projects when the same amount is injected.
Criteria for selecting altcoins for an investor's portfolio
When selecting digital assets, it is worth exercising care and responsibility, avoiding hype and being guided by technical and market characteristics, as well as - to some extent - the human factor.
An intelligent system from the Broex.io investment platform will tell you which projects are relevant and promising, as well as help the novice participant to build his portfolio.
Criteria for selecting digital assets:
- team: are proven developers and/or financial experts involved in the creation of the new cryptocurrency or ecosystem?
- community: Is there a strong community of third-party developers, users and investors around the project?
- investors: Is the technology promising enough to interest large private investors and hedge funds?
- reputation: Has the platform been hacked and has there been any suspicion of insider trading of tokens by the team?
- technology: are the creators of the project using best practices, are they introducing something new, and can their platform become part of a traditional or decentralised financial system?
- ecosystem: Will the company be able to attract developers of decentralised applications or financial instruments? Is the project able to interact with other blockchains, applications, cryptocurrencies?
- roadmap: Does the startup have a clear development plan and to what extent are the developers adhering to it?
- market position: is the project sufficiently capitalised, is there trading volume? To what extent is the cryptocurrency susceptible to manipulation by pump-and-dump schemes?
Promising altcoins to include in an investor's portfolio
Today, cryptocurrencies are no longer siloed - they are a powerful DeFi infrastructure with interacting blockchains.
ETH is the second-largest cryptocurrency and the largest altcoin that underpins the Ethereum ecosystem. The latter remains the largest marketplace for decentralised instruments ranging from gaming and collectables to financial applications that have become the best version of the tools of the world of traditional finance.
In 2021, the Ethereum exchange rate reaches ATH, the highest value ever observed. Optimism is building towards decisions to scale up - this will increase the speed of the network and reduce fees - ahead of the global ETH 2.0 upgrade.
Binance Coin (BNB)
Binance Coin has been the major discovery of the beginning of 2021 among the big projects. The BNB token underpins settlement on the Binance exchange and the decentralised Binance Smart Chain (BSC) system. The latter has become a major competitor to Ethereum due to its high performance, low fees and broad partner base.
The project of Charles Hoskinson - co-founder of BitShares and Ethereum - has been in the community spotlight since 2020 thanks to a series of successive steps to upgrade it:
- an upgrade codenamed Mary: preparing the groundwork for user tokens - assets created by third-party developers - and smart contracts to function on the Cardano network;
- update of Daedalus' native wallet: the wallet from Cardano's developers gets support for custom, or native, tokens;
- the announcement of preparations for the Alonzo upgrade: the latter will bring smart contracts - one of the key technologies of decentralised finance - to the ecosystem, allowing transaction terms to be programmed between participants and executed automatically.
Cardano could benefit further from Charles Hoskinson's marketing efforts in the African market, one of the most promising and fastest-growing.
The head of the project, Gavin Wood, is probably the most established member of the cryptocurrency community. He has participated in the formation of Ethereum, Parity Technologies, Web3 Foundation and the Solidity smart contract programming language. Each of the Master of Engineering and Doctor of Computer Science projects has proven successful.
In 2017, during the ICO boom, the Polkadot team managed one of the most successful initial coin offerings - analogous to an IPO on traditional exchanges - and raised $145 million in investment. Polkadot took Wood's team 3 years to develop - the project was launched in 2020. The sophisticated solutions of the experienced developers have been praised by technicians, users and investors - one of the most sophisticated projects in the decentralised industry is also known as one of the most accessible to the end consumer.
Polkadot focuses on decentralised finance and interaction with other blockchains. Its main advantage is security - financial and technical - as projects that connect to the DOT ecosystem automatically join Gavin Wood's proprietary security system. Traditionally, creators of DApps and DEX featured in other ecosystems have had to deal with security issues themselves, which has harmed the overall position of the platforms.
Chainlink holds a leading position in the niche market of "oracles" - solutions that combine the real world and blockchain technology. Trustees in the LINK ecosystem collect data on real-world transactions - such as bets - and enter it into Chainlink's secure and strictly programmed smart contracts to meet agreed terms.
Given the trend towards digitalisation of the physical world, analysts are high on the platform's prospects.
The prospects for decentralised ecosystems and their underlying cryptocurrencies are highly valued for several reasons:
- The expansion of the decentralised finance space and the transition of traditional finance players to advanced solutions;
- the interoperability of disparate blockchains, empowering users in finance, copyright and other areas;
- the use of non-fungible token technology to protect copyrights or authenticate virtual and physical goods;
- the promotion of "oracles" that allow any transaction down to the verbal agreement to be easily digitised.
As for bitcoin, its prospects also look optimistic - the oldest cryptocurrency asset not only serves as a digital counterpart to gold and a payment instrument but also gradually adopts technologies from third-party developers, including solutions for network scaling and smart contracts.