The temptation of overnight fortune with crypto is tempting to many. Every day, there’s a new altcoin launched with promises to be the “next big thing.” It’s no wonder that investors are lured in by the siren call of exponential returns. Binance Coin (BNB), Cardano (ADA), and millions more have made front pages and induced FOMO. Beneath the surface of these tempting opportunities lies a harsh reality: for most investors, focusing on established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) is a far safer and more sensible strategy.
I get the impulse, believe me. The tales of early Bitcoin adopters suddenly finding themselves millionaires are the stuff of legend. It’s totally understandable to go after that once-in-a-lifetime opportunity. You’re hoping to find the next diamond in the rough that will appreciate tenfold. She had me at ‘Hello’, but I have long been smitten with the promise of most altcoins. I read whitepapers, study the market, and look for trends with the hope of finding the next home run. Experience has taught me a valuable lesson: the altcoin market is a minefield.
One of the most significant risks when it comes to investing in altcoins is the volatility that comes with them. For many, Bitcoin and Ethereum have shown themselves to be great hedges against inflation, albeit volatile ones. This is in stark contrast to altcoins, which are far more susceptible to sudden, epic price swings. One negative tweet from a leading influencer can see an altcoin’s price nosedive. Likewise, one bad press release or a small technical error and you could lose most of your investment within minutes.
Don’t overlook security concerns. As opposed to Bitcoin, which is supported by an extensive and distributed proof-of-work consensus mechanism, most altcoins depend on weaker substitutes. This renders them more susceptible to attacks and manipulation. An attacked or halted network can lead to lost funds due to theft or network halt. This sends investors home with empty hands, nothing to demonstrate for their diligence. This concentration of ownership makes it possible for these small groups of individuals to exercise outsized power over the market across many altcoins. This counterproductive dynamic increases the chances of exploitation and bad faith practices.
The other aspect of this regulatory landscape is a major problem for altcoins, too. Yet most of these cryptocurrencies exist in a speculative legal bubble, poised for an onslaught of regulatory activity and enforcement. Even more recently, the Securities and Exchange Commission (SEC) sued some notable altcoins. In doing so, they have labeled these assets as securities and have subjected them to stringent regulatory standards. This in turn results in forcing delisting from exchanges, class-action lawsuits, and eventually the demise of the project.
Beyond the inherent risks of the altcoin market, there is the issue of long-term viability. The real question is, how many of these thousands of altcoins do you think will be around five or ten years from now? The overwhelming majority will soon disappear without a trace, leaving investors with nothing more than a worthless token on their hands. Conversely, Bitcoin and Ethereum have clearly shown they’re here to stay. They have a head start, a massive and highly engaged community of developers, a strong network effect, and widespread adoption. They are the digital gold and silver of the crypto universe. Their supremacy looks set to continue for the foreseeable future.
To be sure, some would counter that investing in altcoins is worth the risk considering the potential rewards. They focus on the one altcoin that takes off like a rocket, delivering astronomical returns for early adopters. And sure, it’s accurate to say that some altcoins have so far this cycle turned out massive returns, but those are the exception to the rule. The reality is that for every altcoin that succeeds, dozens more die, quickly cutting investors out of their hard-earned money.
I’ve watched it occur over and over again. Friends and colleagues followed the siren call of easy money. They enthusiastically sunk all their savings into random altcoins, only to see their life savings evaporate. The emotional impact of these damages can be overwhelming, resulting in physical stress and anxiety, and even depression. It’s just not worth the risk.
Take a look at the forecasts for BNB and ADA. Although forecasts indicate some big increases in the years ahead, these are only forecasts – projections based on a number of unknown variables. As always, there’s no certainty that these altcoins will continue to perform as they have. There are innumerable variables beyond their control that can affect their success, from shifting market demands to global regulatory environments and technology itself. To base your entire program on these rogue projections is an extraordinarily reckless bet.
It’s time for investors to stop chasing after the next shiny object. Instead, Congress should focus on creating a strong foundation with proven cryptocurrencies such as Bitcoin and Ethereum. They have history, the strongest network effect, and most importantly a use case. These are the bedrocks of the cryptocurrency market, and they will continue to be for many years to come.
Naturally, we’re not saying that altcoins are without value completely. Many altcoins bring unique technologies and applications to the table which have the potential to revolutionize current industries. These projects are the exception, not the rule, and they make smart due diligence on the project’s viability essential prior to investing. Investors should evaluate the team's expertise, the project's technology, its partnerships, and its community support before making any investment decisions.
As a journalist who’s spent nearly a decade in this space, I know enough to appreciate substance over hype. The siren song of easy money through crony capitalism is hard to resist. Smart investing is all about working toward sustainable growth, creating enduring value.
Ultimately, whether you should invest in altcoins, or rather invest in the well established cryptocurrencies is up to you. In fact for the average investor, particularly those new to the crypto space, the way to go is keeping your eye on Bitcoin. Further, Ethereum is a far more secure investment option. It’s a patient, prudent approach that favors preserving one’s capital and growing it gradually, rather than chasing the seductive promise of instant wealth. It’s a smart personal finance strategy that gives you exposure to the long-term potential of the cryptocurrency revolution without jeopardizing your financial future.
