Is Trading Altcoins More Profitable?
Cryptocurencies aside from bitcoin are called ‘altcoins’, short for alternative coins. As bitcoin have increased in price substantially since the day it was launch in 2009, all altcoins are trying to follow suit of it’s growth in value.
Many prefer to invest in the altcoins market due to its high profitability. Some altcoins, given enough support to its value have increased from 2x to 100x in a short period of time. An evident example would be cardano (ADA), where at token sale, its price was only at 0.02 USD. After almost a year, ADA’s price has reached 60 times of its sale price at around 1.20 USD. So there is definitely “high growth” on altcoins now compared to Bitcoin.
One of the things to look at in evaluating altcoins is “liquidity”. Given that Bitcoin is the first and most popular cryptocurrency in the world, it already has a high volume of activity in the market. The liquidity of an asset is its ability to to be converted into fiat or other cryptocurrencies quickly. One perfect example of most liquid assets is cash where you can use it to buy just about anything.
In a market that is very volatile, liquidity can be an important factor for a cryptocurrency trader. This is because crypto assets can appreciate and depreciate in value quickly. When they appreciate in value and the trader wants to sell them, there must be someone willing to buy them in the market.
Merchants accepting cryptocurrencies are also considered as a market. The more a cryptocurrency is being used or moved in the market, the more its value increases.
Cryptocurrencies are considered to be elastic when it comes to the “price elasticity of demand”. The price elasticity of demand is the measure of the change in the quantity demanded or purchased of a good/asset in relation to its price change. If the change in quantity demanded for a coin is greater than the change in its price, then the crypto asset is said to be elastic.
Altcoins are regarded more elastic than bitcoin because they are more cheaper. A lower price cryptocurrency means more people are able and willing to purchase them.
In conclusion, we can not deny the fact that bitcoin is still the pack leader and altcoin prices follow its price movement most of the time. However, there is what we call an “alt season” wherein it happens when bitcoin price movement stagnates. During these times, altcoins heat up fast and if you can time them right, you can get far bigger gains than bitcoin.
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