Blockchain and cryptocurrencies has been all the buzz in the nearest past. Though the world of cryptocurrencies is unstable and has been constantly changing, it is still only expanding and growing with more and more people starting to use blockchain and cryptocurrencies.
Perhaps the most important of all of them is Bitcoin, but to think that it is the only popular cryptocurrency would be a huge mistake. In fact, working with altcoins (or cryptocurrencies other than Bitcoin) can be just as profitable as with Bitcoin alone. Hence, here’s how even an average student stays in profit by leading a portfolio with 5-10 altcoins.
Which Are Cryptocurrencies Popular?
As mentioned above, Bitcoin is by far the most common and popular cryptocurrency currently available on the market. However, it is not the only well-known one and there are many other altcoins you can choose from to start your portfolio:
- Ethereum (ETH): The most popular alternative to Bitcoin, Ethereum is a decentralized software platform allowing users to build Smart Contracts and Decentralized Applications (dApps). It eliminates the chances of fraud, control, downtime and third-party interference.
- Litecoin (LTC): Another cryptocurrency with a lengthy history, Litecoin was created by MIT graduate and ex-Google engineer Charlie Lee and launched in 2011. It is also based on an open-source payment network with no central authority control. The cryptocurrency uses "scrypt" as proof-of-work which is decoded by consumer-grade CPUs.
- Polkadot (DOT): One of the things that Polkadot is known for is that it was created by Gavin Wood who is the co-founder of Ethereum. Polkadot is a proof-of-stake cryptocurrency which delivers interoperability between other blockchains.
- Stellar (XLM): Though it has been promoted as a cryptocurrency for enterprises, Stellar is still an open-source blockchain network that can be used by anyone. Enterprises can use the cryptocurrency to connect with financial institutions and execute particularly large transactions.
- Cardano (ADA): Created by a team of engineers, mathematicians, and cryptography experts, Cardano is often referred to as an "Ouroboros proof-of-stake" cryptocurrency. Interestingly, one of the co-founders of Cardano is Charles Hoskinson, who is also one of the co-founders of Ethereum.
- Tether (USDT): Out of the different stablecoins available on the market, Tether was one of the first and most popular ones. Stablecoins are cryptocurrencies that, in order to reduce their volatility, are pegged to a currency or another external reference. Unlike some other cryptocurrencies, stablecoins are able to smooth out different fluctuations in their market value.
- Others: Other cryptocurrencies include Bitcoin Cash (BCH), Chainlink, Binance Coin (BNB), Monero (XMR) and others.
All of these cryptocurrencies have their own advantages and disadvantages, but when you decide to use one over another, you need to first learn as much as you can about each of them to make the right choice for yourself.
Where Do You Start With Your Portfolio?
If you are thinking of having a portfolio with altcoins, the first thing you should do is perform your own research of the topic. "But how can I do my homework on this subject?" you may think. Well, there are many ways you can get started:
- Read about cryptocurrencies online and follow the latest news in the industry to learn as much as you can about the market.
- Buy books dedicated to the more niche topics to gain a specific edge in the expertise you have in different niches within the industry.
- Talk to other cryptocurrency enthusiasts like yourself and listen to what experts are saying to gain even more insight.
What Is the Difference Between Trading and Investment?
Apart from mining, buying and trading cryptocurrencies are the two most common actions you can perform with such currencies. Even if you know what is trading, you may not be completely aware of what investment means in the world of cryptocurrencies. In fact, the debate of trading vs. investing has been going on for a long time now and is unlikely to die down anytime soon.
Trading and investing can be effective in their own ways, but you need to understand the fundamental differences between the two to use them properly, especially when it comes to cryptocurrencies:
- Investment Period: Investing requires you to focus on long-term results while trading is all about short-term outcomes.
- Trade Frequency: Investors often have a low trade frequency (i.e. lower frequency of executing trades) while traders have a high trade frequency.
- Risk Profile: Cryptocurrencies are some of the riskiest investments due to their price fluctuations. Those who like taking risks are referred to as risk-takers while those who don’t are usually called risk-averse. Investors in cryptocurrencies are usually considered more risk-averse than traders.
- Type of Analysis: Investors more often use fundamental analysis while traders prefer using technical analysis for cryptocurrencies.
- Profit Methodology: For investors, there are four ways to generate profits (price appreciation, dividends, hard forks and airdrops) while for traders the focus is mostly on price appreciation.
What Should You Do with Your Portfolio?
If you are a student you probably think about financial stability – and leading a portfolio with altcoins can be a great solution for this. Here’s what you should do with it now that you know everything covered in this article:
- Diversify your portfolio, but don’t do this by holding the top ten or twenty cryptocurrencies. Instead, diversify by looking at use cases for blockchain.
- Hold stablecoins, but don’t make them a big percentage of your portfolio. Rebalance regularly during uptrends and downtrends.
- Use bots to automate your portfolio actions during price fluctuations. This will make your trading and investing much easier.
To sum up, if you want to work with cryptocurrencies and have your own portfolio that will be successful, you don’t necessarily have to start with Bitcoin and only stick to it. There are many other altcoins to choose from – and you don’t even need to work with many of them to achieve great results. Just use the tips from this article and you will get started quickly.